### Managerial Economics Questions In Tutorial Library

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### TITLE: Managerial Economics Questions

#### CLASS / COURSE: Economics

QUESTION DESCRIPTION:

Question 1:

Lobo Lighting Corporation currently employs 100 unskilled laborers, 80 factory technicians, 30 skilled machinists, and 40 skilled electricians. Lobo feels that the marginal product of the last unskilled laborer is 400 lights per week, the marginal product of the last factory technician is 450 lights per week, the marginal product of the last skilled machinists is 550 lights per week, and the marginal product of the last skilled electrician is 600 lights per week. Unskilled laborers earn \$400 per week, factory technicians earn \$500 per week, machinists earn \$700 per week, and electricians earn \$750 per week. Is Lobo using the lowest cost combination of workers to produce its targeted output? If not, what recommendations can you make to assist the company?

Question 2:

Suppose that as a result of recent labor negotiations, wage rates are reduced by 10% in a production process employing only capital and labor. Assuming that other conditions (e.g., productivity) remain constant, determine what effect this decrease will have on the desired proportions of capital and labor used in producing the given level of output at minimum total cost.

Question 3:

Quantity Sold      Uniform Price     Total Revenue                  Marginal Revenue            Variable Cost

0                                           \$50.00                  \$0                                         \$0                                         \$28

1                                           \$48.00                  \$48                                      \$48                                      \$28

2                                           \$46.00                  \$92                                      \$44                                      \$28

3                                           \$45.00                  \$135                                    \$43                                      \$28

4                                           \$44.00                  \$176                                    \$41                                      \$28

5                                           \$42.00                  \$210                                    \$34                                      \$28

6                                           \$40.00                  \$240                                    \$30                                      \$28

7                                           \$38.31                  \$268                                    \$28                                      \$28

8                                           \$36.50                  \$292                                    \$24                                      \$28

9                                           \$34.50                  \$311                                    \$19                                      \$28

10                                                                                                                    \$16                                      \$28

11                                                                                                                    \$13                                      \$28

12                                                                                                                    \$10                                      \$28

13                                                                                                                    \$7                                         \$28

14                                                                                                                    \$4                                         \$28

15                                                                                                                    \$0                                         \$28

16                                                                                                                    (\$1)                                      \$28

17                                                                                                                    (\$4)                                      \$28

18                                                                                                                    (\$7)                                      \$28

1.       Complete the demand and total revenue spreadsheet for daily sales of a golf shirt in each of Ralph Lauren s discount stores.

2.       What price maximizes sales revenue? What price maximizes operating profit? Why?

3.       How could Ralph Lauren s managers provide an incentive for profit-maximizing behavior?

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