Managerial Economics
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- Date Submitted: 09/10/2013 06:58 PM
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Unit 3 Assignment
Student Name: Rosiland HesterHester
Please answer the following questions. Submit as a Microsoft Word® document to the Dropbox when completed.
1. Explain the relationship between the price elasticity of demand and total revenue.
If demand is price inelastic, an increase in price will lead to increase in revenue because the percentage increase in price will cause a smaller decrease in quantity demand. If demand is elastic, an increase in price will lead to a decrease in revenue because the percentage increase in price will cause more reduction in quantity demanded.
2. Is the price elasticity of gasoline more elastic over a shorter or a longer period of time? Explain.
It is more elastic in the long run, because people have option to turn to solar and wind energy.
3. Determine whether each of the following is an explicit cost or an implicit cost:
a) Payments for rented manufacturing equipment
Implicit
b) A firm’s use of a warehouse that it owns and could rent to another firm
Implicit
c) Wages paid to the firm’s workers
Implicit
d) The wages the firm’s owner could earn if he worked for another company
Explicit
4. Consider the following information in the table for Pat’s Pizza Restaurant and answer the questions below.
|Marginal Product of Capital |4,000 |
|Marginal Produce of Labor |100 |
|Wage Rate |$10 |
|Rental Price of Pizza Ovens |$500 |...
Student Name: Rosiland HesterHester
Please answer the following questions. Submit as a Microsoft Word® document to the Dropbox when completed.
1. Explain the relationship between the price elasticity of demand and total revenue.
If demand is price inelastic, an increase in price will lead to increase in revenue because the percentage increase in price will cause a smaller decrease in quantity demand. If demand is elastic, an increase in price will lead to a decrease in revenue because the percentage increase in price will cause more reduction in quantity demanded.
2. Is the price elasticity of gasoline more elastic over a shorter or a longer period of time? Explain.
It is more elastic in the long run, because people have option to turn to solar and wind energy.
3. Determine whether each of the following is an explicit cost or an implicit cost:
a) Payments for rented manufacturing equipment
Implicit
b) A firm’s use of a warehouse that it owns and could rent to another firm
Implicit
c) Wages paid to the firm’s workers
Implicit
d) The wages the firm’s owner could earn if he worked for another company
Explicit
4. Consider the following information in the table for Pat’s Pizza Restaurant and answer the questions below.
|Marginal Product of Capital |4,000 |
|Marginal Produce of Labor |100 |
|Wage Rate |$10 |
|Rental Price of Pizza Ovens |$500 |...