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Can you please answer these questions and say WHY you chose this-(Answered)

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Can you please answer these questions and say WHY you chose this answer. I would like to have an explanation


1. The "On the Road" bicycle manufacturing company sold 500 bicycles last

 

year. Their fixed costs were $10 per unit, and their variable costs were $15

 

per unit. If each bike sells for $100, most likely the company had a:

 

Total profit of $37,000

 

Total profit of $50,000

 

Total loss of $37,000

 

Total loss of $50,000

 

The company broke even

 


 

2. Jessica Simpson has decided to open a small fast food place that specializes in

 

Buffalo wings. To do so she must resign from her current full time position which

 

pays her $40,000/year and take over a small store-front building which she already

 

owns but currently rents to her brother, Homer, for $6,000/year. Her annual

 

expenses at the restaurant will be $50,000 for the food and $2,000 for gas and

 

electricity. What are her explicit costs?

 

$40,000

 

$46,000

 

$50,000

 

$52,000

 

$98,000

 

3. Economies of scale exist when the long run average cost curve:

 

Falls

 

Rises

 

Remains constant

 

Becomes vertical

 

Does not exist

 

Figure 3-4 Two Firm Payoff Matrix

 

Huggies Diapers

 

High Price Low Price

 

$60 Million $20 Million

 

High PriceA

 

B

 

$60 Million $10 Million

 

Pampers Diapers

 

$10 Million $20 Million

 

Low Price C

 

D

 

$20 Million $20 Million

 


 

4. Using Figure 3-4 above, if the two firms were free to collude, they would select

 

quadrant ___ but if they are not allowed to collude, they will most likely end up in

 

quadrant ______.

 


 


 


 


 


 


 

D, A

 

C, B

 

A, D

 

A, A

 

Figure 3-4 Two Firm Payoff Matrix

 


 

Huggies Diapers

 

High Price Low Price

 

$60 Million $20 Million

 

High PriceA

 

B

 

$60 Million $10 Million

 

Pampers Diapers

 

$10 Million $20 Million

 

Low Price C

 

D

 

$20 Million $20 Million

 


 

5. Using Figure 3-4 shown above, which of the following statements are

 

1

 

2

 

3

 

4

 

5

 


 

correct?

 

If both Huggies and Pampers charge a high price, each will earn $60 million in

 

profits.

 

If Huggies charges a low price and Pampers charges a high price, their

 

combined profits will be $30 million.

 

If both firms charge a low price, each with earn $20 million in profits.

 

The Nash equilibrium in this case will be in cell D (southeast quadrant).

 

The firms have an incentive to collude and agree to both charge a high price.

 


 


 


 


 


 


 


 

Only statements 1 and 2 are correct

 

Only statement 4 is correct

 

Only statement 3 and 5 are correct

 

None of the statements are correct

 

All of the statements are correct

 


 

 

Paper#9209617 | Written in 27-Jul-2016

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