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William Howe must decide whether to start a business renting beach umbrellas

at an ocean resort during June, July, and August of next summer. He believes

he can rent each umbrella to vacationers at $5 a day, and he intends to lease 50

umbrellas for the three-month period for $3,000. To operate this business, he

does not have to hire anyone (but himself), and he has no expenses other than

the leasing costs and a fee of $3,000 per month to rent the business location.

Howe is a college student, and if he did not operate this business, he could

earn $4,000 for the three-month period doing construction work.

a. If there are 80 days during the summer when beach umbrellas are

demanded and Howe rents all 50 of his umbrellas on each of these days,

what will be his accounting profit for the summer?

b. What will be his economic profit for the summer?

 

 
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On March 3, 2008, a revival of Gypsy, the Stephen Sondheim musical, opened

at the St. James Theater in New York. Ticket prices ranged from $117 to $42 per

seat. The show’s weekly gross revenues, operating costs, and profit were estimated

as follows, depending on whether the average ticket price was $75 or $65

On March 3, 2008, a revival of Gypsy, the Stephen Sondheim musical, opened at the St. James Theater...

With a cast of 71 people, a 30-piece orchestra, and more than 500

costumes, Gypsy cost more than $10 million to stage. This investment

was in addition to the operating costs (such as salaries and theater rent).

How many weeks would it take before the investors got their money

back, according to these estimates, if the average price was $65? If it

was $75? b. George Wachtel, director of research for the League of American Theaters

and Producers, has said that about one in three shows opening on Broadway in recent years has at least broken even. Were the investors in Gypsy taking a substantial risk? c. According to one Broadway producer, “Broadway isn’t where you make the money any more. It’s where you establish the project so you can make the money. When you mount a show now, you really have to think

about where it’s going to play later.” If so, should the profit figures here be interpreted with caution? d. If the investors in this revival of Gypsy make a profit, will this profit be, at least in part, a reward for bearing risk?

 

 
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The Dolan Corporation, a maker of small engines, determines that in 2012 the

demand curve for its product is P = 2,000 – 50Q

where P is the price (in dollars) of an engine and Q is the number of engines

sold per month. a. To sell 20 engines per month, what price would Dolan have to charge?

b. If managers set a price of $500, how many engines will Dolan sell per month?

c. What is the price elasticity of demand if price equals $500?

d. At what price, if any, will the demand for Dolan’s engines be of unitary

elasticity?

 

 
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a) Assume that you have just become responsible for a machine park where one of the machines cuts pipes to a number of different lengths. You get feedback from subsequent machines in the completion of the product that the length is not always within the tolerance limits and sometimes pipes also return to be re-cut and sometimes these pipes must be discarded because they cannot be re-cut. Describe how you should, in a systematic way, control and change this manufacturing process so that the manufacturing meets the requirements of the subsequent machines, which ultimately meets the customer’s requirements.
b) In another part of the production you have problems with queues in front of a machine group. You realize quite quickly that it is the first two machines that create queues as all jobs have to go through these two machines and that the flow is then spread over several machines, which means that subsequent machines can be run according to FIFO and no queues will be created there. From the business system, you receive which jobs are in the queue and the jobs that will be produced in the near future, as well as the processing time for each job in the two machines. Describe how you, in an optimal way, can improve the throughput through the two machines.
 
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