Managerial Economics Quiz 1: 23 February 2025 (January 2025 term)

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Your explicit costs include

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Your implicit cost will be

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not accept delivery. You paid $100 for these cases. You have a deal with your grocers that they will pay you $0.25 for each dollar of returned merchandise. Just this week, you found a fraternity on campus that will buy the five cartons for $55 (and will pick them up from your apartment, relieving you of the need to deliver them to the frat house).
What is the opportunity cost of filling this order in $ (i.e., selling these cartons to the fraternity)? _____________________

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not accept delivery. You paid $100 for these cases. You have a deal with your grocers that they will pay you $0.25 for each dollar of returned merchandise. Just this week, you found a fraternity on campus that will buy the five cartons for $55 (and will pick them up from your apartment, relieving you of the need to deliver them to the frat house).
Should you sell the Fritos to the fraternity? _________________

Imagine that you have started a snack food delivery business on your college campus. Students send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at local grocery stores to fill these orders and then deliver the orders. To operate this business, you pay $500 a month to lease computer time from a local Web-hosting company to use its server to host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you fill an order, you pay the grocer for the merchandise. You then collect a payment, including a delivery fee, from the students to whom you sell. If you did not operate this business, you could work at the campus dining hall, earning $6 an hour. Right now, you operate your business five days a week, Monday through Friday. On weekends, your business is idle, and you work in the campus dining hall.
Based on the above data, answer the given subquestions.

Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not accept delivery. You paid $100 for these cases. You have a deal with your grocers that they will pay you $0.25 for each dollar of returned merchandise. Just this week, you found a fraternity on campus that will buy the five cartons for $55 (and will pick them up from your apartment, relieving you of the need to deliver them to the frat house).
Your sunk cost of doing business is (in $) ____________________

Based on the above data, answer the given subquestions.

Based on the above data, answer the given subquestions.

What is the cost-minimizing input combination if the firm wants to produce 1,000 units per year? L* = _________________

Based on the above data, answer the given subquestions.

What is the cost-minimizing input combination if the firm wants to produce 1,000 units per year? K* = _________________

Elmo finds himself at a Coke machine on a hot and dusty Sunday. The Coke machine requires exact change-two quarters and a dime. No other combination of coins will make anything come out of the machine. No stores are open; no one is in sight. Elmo is so thirsty that the only thing he cares about is how many soft drinks he will be able to buy with the change in his pocket; the more he can buy, the better.
Based on the above data, answer the given subquestions.

If Elmo has 2 quarters and a dime in his pockets, he can buy 1 soft drink. How many soft drinks can he buy if he has 4 quarters and 2 dimes? _______________

Elmo finds himself at a Coke machine on a hot and dusty Sunday. The Coke machine requires exact change-two quarters and a dime. No other combination of coins will make anything come out of the machine. No stores are open; no one is in sight. Elmo is so thirsty that the only thing he cares about is how many soft drinks he will be able to buy with the change in his pocket; the more he can buy, the better.
Based on the above data, answer the given subquestions.

Does Elmo have convex preferences between dimes and quarters?

Based on the above data, answer the given subquestions.

Marginal Product of Labour MPL is __________________

Based on the above data, answer the given subquestions.

Marginal Product of Capital MPK is __________________

Based on the above data, answer the given subquestions.

Find the optimal input combination given that the firm wishes to produce 200 units of output. L* = _________________

Based on the above data, answer the given subquestions.

Find the optimal input combination given that the firm wishes to produce 200 units of output. K* = _________________

Based on the above data, answer the given subquestions.

Total cost of production for 200 units of output will be (in $) _________________

Based on the above data, answer the given subquestions.

What will be the average fixed cost if company produces 100 units __________________

Based on the above data, answer the given subquestions.

What is marginal cost of company at q=25? _________________

Based on the above data, answer the given subquestions.

What is average variable cost at q=25? _____________________

The marginal product of labour is defined as

If marginal costs equal average total costs