Microsoft Word - Solutions_to_Homework_7_fall_08

Microsoft Word - Solutions_to_Homework_7_fall_08 - Standard...

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

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
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 Î q*(standard spaces)=75 Î 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

This note was uploaded on 07/21/2009 for the course BUAD 311T taught by Professor Vaitsos during the Fall '07 term at USC.

Ask a homework question - tutors are online