MBA
1.(10 pts.) Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new car.How would understanding the concept of opportunity costs help her make a decision?
“2. {10 pts.) Referring to the table below,hiring a driver costs $10. Each machine costs $100.Which method should he”
use and why?
“An independent trucker has the following options. If he buys expensive machinery then he can hire fe\•ter drivers to deliver the same output. Over the course of this mooth he has to deliver to SO soots. To do this job he has 4 insensible combinations of out e>ut tha t he can use:”
Method 1: 20drivers 10machines
Method 2: SO drivers 2 machines
Method 3: 100 drivers O machines
Method 4: 10drivers 12 machines
3.{10 pts.) Enron will be an example of a dysfunctional company for many years to come.It was c ear y a company riddled with fraud and excess and its conduct drove it into bankruptcy.The text argues that individual behavior was not at the core of Enron’s problems.What were the problems with this corporation from an organizational architecture point of view?
“4. (10 pts.) For many corporations such as utility companies,a major portion of the cost of production is fixed in the” short run.Should these very large fixed costs be ignored when the executives are maldng output and pr cing decisions? Why?
S. (!Opts.) Choose a real life example of a firm that you think is part of an oligopoly market and describe the characteristics of the market structure that explain why the firm would be classified as such.
6. (10 pts.;2 pts each) You are the manager for Dunkin Donuts and know the follow ing elasticities: = 1.5 ‘= 1.2 fl llyl = 0.5 “l’lis the price elasticity of demand for Dunkin Donuts (DO) glazed doughnuts,fl q1is the cross elasticity of demand” “between DOglazed doughnuts and Kr spy Kreme (KK) glazed doughnuts,11 v2 is the cross elasticity of demand between OD glazed doughnuts and OD French Vanilla coffee,and l’l• is the income elasticity of OD glazed doughnuts.”
“a) If you want to increase your sales of glazed doughnuts by 30%,in what direction and by how much do you need” to change the price?
“b) If you make the percentage price change that you calculated in part a) will total revenue increase or decrease?” How do you know?
c) Kr spy Kreme lowers its price of glazed doughnuts by 20%. The demand for Dunkin Donuts glazed doughnuts w ill change by what percentage and in what direction?
