1. (10 pts.) Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new...

Question

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? XXXXXXXXXXpts.) Referring to the table below, hiring a driver costs $10. Each machine costs $100. Which method should he use and why? XXXXXXXXXXpts.) Enron will be an example of a dysfunctional company for many years to come. It was clearly 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.
	
Document Preview: 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? 3. (10 pts.) Enron will be an example of a dysfunctional company for many years to come. It was clearly 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 making output and pricing decisions? Why? 5. (10pts.) 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 following elasticities:	?= 1.5		? I = 1.2		? xy1 = 0.5		? xy2 = -0.5	? is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, ?xy1 is the cross elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, ?xy2 is the cross elasticity of demand between DD glazed doughnuts and DD French Vanilla coffee, and ? I is the income elasticity of DD glazed doughnuts.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?If you make the percentage price change that you calculated in part a) will total revenue increase or decrease?  How do you know?Krispy Kreme lowers its price of glazed doughnuts by 20%.  The demand for Dunkin Donuts glazed...

David · Accepted Answer

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?
The decision must be made after the following things are known:
· Cost of the car in terms of price or in terms of the monthly payout to the loan she takes for the car. 
· Alternative Uses of her funds
· Costs of using an alternate mode of transport.
Suppose she has own funds to buy. The opportunity cost of these funds is their best alternative use. She may want to invest in stocks that give her 10% return or keep bank deposits that give her 5% returns. she should buy the car only if the returns from the car (in terms of saving on other modes of transport) are more than 10%. If this is not so then she should not buy the car and put all money in stocks, as they give her highest return.(among deposits, stocks and car). Therefore, opportunity cost must be lower than the return on investing in a car.
2. (10 pts.) Referring to the table below, hiring a driver costs $10. Each machine costs $100. Which method should he use and why? 
Cost1: 100*10 = 1000
Cost2: 10*10 + 12*100 =1300
Cost3: 20*10 + 10*100 = 1200
Cost4: 50*10 + 2*100 = 700
Method 4 is the best as it is the cheapest.
3. (10 pts.) Enron will be an example of a dysfunctional company for many years to come. It was clearly 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?
Enron was started as a merger entity for two gas companies, with the motive of profits by Kenneth Lay.  The problems were organizational in the sense that as an entity it encouraged its own employees to engage in trading on stock exchanges, to the extent of covering their losses by borrowings, that it could not repay. Jeff Skilling ratified the Mark to Market method of accounting where actual profits were shown on the basis of future accruals and cash flows. It created subsidiaries to buy its loss making plants at inflated prices.

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?...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment