Microsoft Word - Solutions_to_Homework_7_fall_08

Microsoft Word - Solutions_to_Homework_7_fall_08 - Standard...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
1 BUAD 311T Solutions to Homework 7 1. See Spreadsheet “Solution to HW 7 Problem1.xls” 2. Tom Trojan (a) E(Short|q=500) =0.15(600-500)+0.1(700-500)+…+…+0.05(1000-500)=110 units E(Left|q=500) =0.15(500-400)+0.25(500-300)=65 (b) C TM =17¢ [ could have sold to distributor for 17¢; opportunity cost] C NE =25-17=8¢ (Could have sold at shop instead sold to distributor;; opportunity cost) Note: “Variable” production cost (15¢) is sunk cost. (c) T.F.R= 8/ (8 + 17) =0.32 Ö q * =400 3. Tammy Trojan Total spaces=100
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Standard rate= $21 ($6*3.5 hours) Discounted rate = $12.00 Cost = $0.00 C TM = Discounted rate -Cost= $12.00-$0.00=$12.00 (Opportunity cost) Here the cost is zero because it is a sunk cost (the parking lot has already been built). C NE =Standard rate - Discounted rate = $21.00-$12.00=$9.00 (Opportunity cost) TFR= 9/(9+12)=0.43 q*(standard spaces)=75 Early-Bird spaces=25 Demand for Standard Spaces 65 70 75 80 85 P(D=q) 0.15 0.2 0.25 0.3 0.1 P(D<=q) 0.15 0.35 0.60 0.90 1.00...
View Full Document

Ask a homework question - tutors are online