DQ#1 -A domestic shoe company distributes running shoes and tennis shoes for $95 per pair. The marginal cost of producing a pair of running shoes is $63 and the marginal cost of producing a pair of tennis shoes is $47. A Chinese retailer offers to purchase running shoes for $57 per pair and tennis shoes for $53 per pair for distribution in China. Should the shoe company sell any shoes to the Chinese retailer? (Ignore any potential issues of bundling the two types of shoes together as part of the sale and any competitive effects that international sales might have on current domestic sales). Post you own answer, then take a look at how others answered. Q#2A copy company wants to expand production. It currently has 24 workers who share eight copiers. Two months ago, the company added two copiers, and output increased by 100,000 pages per day. One month ago, they added four workers, and productivity also increased by 50,000 pages per day. Copiers cost about twice as much as workers. a. As a manager, would you recommend they hire another employee or buy another copier? Explain. b. Show your calculations. As a manager, would you recommend they hire another employee or buy another copier? Explain. c. Research and quote similar managerial decision in real life Q#3 You are a business owner of a firm that services trucks. A customer would like to rent a truck from you for one week, while you service his truck. You must decide whether or not to rent him a truck. You have an extra truck that you will not use for any other purpose during this week. This truck is leased for a full year from another company for $350/ week plus $.50 for every mile driven. You also have paid an annual insurance premium, which costs $70/ week to insure the truck. The truck has a full 100-gallon fuel tank. The customer has offered you $500 to rent the truck for a week. The price includes the 100 gallons of fuel that is in the tank. It also includes up to 500 miles of driving. The customer will pay $.50 for each additional mile that he drives above the 500 miles. You anticipate that the customer will bring back the truck with an empty fuel tank and will have driven more than 500 miles. You sell fuel to truckers at a retail price $3.35/gallon. Any fuel you sell or use can be replaced at a wholesale price of $2.95/gallon. The customer will rent a truck from another company if you do not accept the proposed deal. In either case, you will service his truck. You know the customer and are confident that he will pay all charges incurred under the agreement. 1. Should you accept or reject the proposed deal? Why, or why not? Show calculations. 2. Would your answer change if your fuel supplier limited the amount of fuel up to 100 gallons/ week you could purchase from him at the wholesale price? Explain.
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DQ#1 – A domestic shoe company distributes running shoes and tennis shoes for $95 per pair….