Price and cost (dollars per item)1412108642MR051015MC = ATC2520Quantity (millions)The figure above shows the demand for items from a warehouse club. All of the people whoshop at the warehouse club have the same demand. If the managers set a single price, sothat all customers pay the same price for every item they buy, the firm makes an economicprofit ofand if the managers use two-part pricing, the firm makes an economicprofit of$40 million; $60 million$60 million; $80 million$0; $80 million$40 million; $80 million

Step 1: Analyse the given diagram Step 2:Understand what is asked and connect it to given data Step…

Answered: Price and cost (dollars per item) 14 12…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 1.3CE

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Based on Zangwill (1992). Murray Manufacturing runs a day shift and a night shift. Regardless of the number of units produced, the only production cost during a shift is a setup cost. It costs $8000 to run the day shift and $4500 to run the night shift. Demand for the next two days is as follows: day 1, 2000; night 1, 3000; day 2, 2000; night 2, 3000. It costs $1 per unit to hold a unit in inventory for a shift. a. Determine a production schedule that minimizes the sum of setup and inventory costs. All demand must be met on time. (Note: Not all shifts have to be run.) b. After listening to a seminar on the virtues of the Japanese theory of production, Murray has cut the setup cost of its day shift to $1000 per shift and the setup cost of its night shift to $3500 per shift. Now determine a production schedule that minimizes the sum of setup and inventory costs. All demand must be met on time. Show that the decrease in setup costs has actually raised the average inventory level. Is this…
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