4-2 Game Day Shuttle Service
Please follow the directions and questions completely. Complete the following problems from Chapters 4 and 5 in Managerial Economics: A Problem-Solving Approach. For each question, write 250-500-word explanation clearly showing how you solved the problem.
4-2 Game Day Shuttle Service
You run a game day shuttle service for parking
services for the local ball club. Your costs for different
customer loads are 1: $30, 2: $32, 3: $35,
4: $38, 5: $42, 6: $48, 7: $57, and 8: $68. What
are your marginal costs for each customer load
level? If you are compensated $10 per ride,
what customer load would you want?
4-6 Copier Company
A copy company wants to expand production. It
currently has 20 workers who share eight copiers.
Two months ago, the firm added two copiers,
and output increased by 100,000 pages per day.
One month ago, they added five workers, and
productivity also increased by 50,000 pages per
day. Copiers cost about twice as much as workers.
Would you recommend they hire another?
employee or buy another copier?
5-4 Solar Panel Installation
A university spent $1.8 million to install solar panels atop a parking garage. These panels will
have a capacity of 500 kw, have a life expectancy of 20 years and suppose the discount rate is 10%.
A. If electricity can be purchased for costs of $0.10 per kwh, how many hours per year
will the solar panels have to operate to make this project break even?
B. If efficient systems operate for 2,400 hours
per year, would the project break even?
C. The university is seeking a grant to cover
capital costs. How big of a grant would make
this project worthwhile (to the university)?
5-5 Toy Trucks
Last year, a toy manufacturer introduced a new toy truck that was a huge success. The company invested $2.5 million for a plastic injection molding machine (which can be sold for $2.0 million) and $100,000 in plastic injection molds specifically for the toy (not valuable to anyone else). Labor and the cost of materials necessary to make each truck is about $3. This year, a competitor has developed a similar toy that has significantly reduced demand for the toy truck. Now, the original manufacturer is deciding whether they should continue production of the toy truck. If the estimated demand is 100,000 trucks, what is the break-even price for the toy truck? Should you shut down?
