Short Answer Questions/Problems (seven) at 5% each for 35% total
Covering Modules 2, 3, 4 & 5 (Chapters 7 - 18)
Each question maximum length of one (1) A4 page, font size 12
Instructions
A cover page will go at the front of your assignment submission. It must contain the following information at a minimum: Name (in full), USQ student number.
The answer to each question shall have a maximum length of one (1) A4 page, font size 12. Content which goes over the one page limit per question will not be marked.
Maximum length of your submission shall therefore be eight (8) pages.
References (if needed and up to a maximum of three) should be placed at the end of your answer to each question.
Each question shall be marked out of five (5).
Files extensions that can be submitted are: doc, docx, rtf.
Title your file with your FULL complete name i.e. Surname first, then First names.
Submission is through the Assignment 2 portal which will be on the front page of the study desk.
Question 1
Your firm prints the novelty baseball cards that candy makers include in their bubble gum. Since you regularly sell 100,000 cards per week, you invested in four separate production lines that can each produce 25,000 cards in a standard 40 hour work week. Now a few of the candy makers are increasing their orders so that you will need to produce 150,000 cards per week, at least temporarily. If you produce these cards by adding a swing shift from 4 pm to midnight, you will have to pay workers time and a half. What does this imply for the shape of your short-run marginal cost curve? What does it imply for your pricing? (5 marks)
Question 2
Nora’s Nicest Knick Knacks has produces a variety of products sold as souvenirs. She started out printing local sayings on tee-shirts, e.g., FDNY, and purchased plain tee-shirts from a single supplier. Since then, she has added coffee mugs, key chains, souvenirs spoons and many other items. For each of these, she has lined up one or more suppliers. How does the change in the sourcing of her inputs affect how much of the value she creates that she gets to capture? (5 marks)
Question 3
Hank’s Honkytonk is a local bar and nightspot. On weekends, it requires a $5 cover charge to defray the costs of the live musical acts Hank brings in. This has worked wonderfully, as it generates capacity crowds and a long line of people waiting to enter. However, after the cost of the acts, he still loses money on the weekends. What is his marginal revenue and marginal cost of a patron on weekends and how should he attempt to fix his unprofitability problem? (5 marks)
Question 4
The Six Flags Over Texas amusement park in the middle of the Dallas-Fort Worth Metroplex has a tie-in marketing campaign with Coca-Cola during the summer. In local grocery stores, some Coke cans offer $5 off admission to the park. Why does Six Flags limit these cans so that none are sold further than 20 miles from the park? (5 marks)
Question 5
A firm and its supplier are going to negotiate a deal every quarter. Since the supplier’s cost is $10 million per quarter and the value to the firm is $14 million per quarter, there is $4 million per quarter to split between the two. However, they can hire a negotiation consultant for a quarter for $500,000. If neither hires the consultant, each expects to get half of the $4 million pot. If only one hires the consultant, it expects to get three-fourths of the pot minus the consultant costs. If they both hire consultants, they cancel each other out and they expect to get half the pot minus the consulting costs. They expect to repeat this process every quarter for the foreseeable future. Can they agree to ban the consultants? (5 marks)
Question 6
A buyer for a department store must decide on which designs the stores will carry before he knows what the demand will be in the coming season. Choosing a poorly demanded design means lots of unsold merchandise and losses that are $200,000 on average. Passing on a highly demanded design means unsold merchandise and missing out on profits that are $300,000 on average. What probability of a design’s success should he be in order to choose to carry it? (5 marks)
Question 7
At an oral auction for a lamp, half of all bidders have a value of $50 and half have a value of $70. What is the expected winning bid if there are four bidders? (5 marks)