【正文】 etc.) in the northeast, is considering two alternative proposals for expansion into southeastern states. Alternative 1: Construct a single plant in Chattanooga, Tennessee with a monthly production capacity of 250,000 cases, a monthly fixed cost of $265,000, and a variable cost of $45 per case. Alternative 2: Construct three plants, one each in Birmingham, Alabama, Tallahassee, Florida, and Charlotte, North Carolina, with capacities of 100,000, 80,000 and 70,000, respectively, and monthly fixed costs of $180,000, $150,000, and $135,000 each. Variable costs would be only $44 per case because of lower distribution costs. To achieve these cost savings, sales from each smaller plant would be limited to demand within its home state. The total estimated monthly sales volume of 175,000 cases in these three southeastern states is distributed as follows: 70,000 cases in Florida, 60,000 cases in North Carolina, and 45,000 cases in Alabama. A. Assuming a wholesale price of $50 per case, calculate the breakeven output quantities for each alternative. B. At a wholesale price of $50 per case in all states, and assuming sales at the projected levels, which alternative expansion scheme provides Tasty Snacks with the highest profit per month? C. If sales increase to production capacities, which alternative would prove to be more profitable? ANS: A. The breakeven output quantity for the single plant alternative is: Q = = = 53,000 cases per month The breakeven output quantities for the multiple plant alternative is: QBirmingham = = 30,000 per month QTallahassee = = 25,000 cases per month QCharlotte = = 22,500 cases per month Thus, the firmlevel breakeven quantity for the multiple plant alternative would be: Q = 30,000 + 25,000 + 22,500 = 77,500 cases per month Provided that demand was distributed among the states in amounts equal to the breakeven quantities for each individual plant. B. Single plant alternative: ? = TR TC = PQ TFC AVC(Q) = $50(175,000) $265,000 $45(175,000) = $610,000 Multiple plant alternative: ? = TR TC = PQ TFCB TFCT TFCC AVC(Q) = $50(175,000) $180,000 $150,000 $135,000 $44(175,000) = $585,000 Management would prefer the single plant alternative because of its greater profitability. C. Single plant at full capacity: ? = TR TC = PQ TFC AVC(Q) = $50(250,000) $265,000 $45(250,000) = $985,000 Multiple plants at full capacity: ? = TR TC = PQ TFCB TFCT TFCC AVC(Q) = $50(250,000) $180,000 $150,000 $135,000 $44(250,000) = $1,035,000 At peak capacity, management would prefer the multiple plant option because of its greater profitability. . Nature39。 a price decrease for a given product will decrease demand for substitutes. In this case, new homes and lakefront property appear to be substitute goods. Elasticity. The Electronics Warehouse, Inc. is a leading retailer of home theater systems. Demand for home theater systems is sensitive to changes in national ine. Electronics retailing is highly petitive, so retail demand for home theater systems is also very pricesensitive. During the past year, the Electronics Warehouse sold 550,000 home theater systems at an average retail price of $4,000 per unit. This year, GDP per household is expected to fall from $58,800 to $53,200 as the nation enters a steep recession. Without any price change, the Electronics Warehouse expects currentyear sales to fall to 450,000 units. A. Calculate the implied arc ine elasticity of demand. B. Given the projected fall in ine, the sales manager believes that current volume of 550,000 units could only be maintained with a price cut of $500 per unit. On this basis, calculate the implied arc price elasticity of demand. C. Holding all else equal, would a further increase in price result in higher or lower total revenue? ANS: A. = = 2 B. Without a price decrease, sales this year would total 450,000 units. Therefore, it is appropriate to estimate the arc price elasticity from a (beforepricedecrease) base of 450,000 units: = = (elastic) C. Lower. Because personal puter demand is in the elastic range, EP = , an increase (decrease) in price will result in lower (higher) total revenues. . EZ Auto Wash recently decided to raise its regular price on wash and wax cycles from $5 to $7 following increases in the costs of equipment and materials. Unfortunately, sales dropped sharply from 6,000 to 2,000 washes per month. In an effort to regain lost sales, EZ ran a coupon promotion featuring $4 off the new regular price. Coupon printing and distribution costs totaled $100, and caused only a modest increase in the typical advertising budget of $1,650 per month. The promotion was judged a success as it proved highly popular with consumers. In the period prior to expiration, coupons were used on 25% of all purchases and monthly sales rose to 3,600 washes. A. Calculate the arc price elasticity implied by the initial response to EZ39。re Away bear indicate that: Q = 50,000 1,000P where Q is Panda bear sales and P is price. A. How many pandas could the zoo sell at $30 each? B. What price would the zoo have to charge to sell 25,000 pandas? C. At what price would panda sales equal zero? D. How many bears could be given away? E. Calculate the point price elasticity of demand at a price of $10. ANS: A. Q = 50,000 1,000P = 50,000 1,000(30) = 20,000 B. Q = 50,000 1,000P 25,000 = 50,000 1,000P 1,000P = 25,000 P = $25 C. Q = 50,000 1,000P 0 = 50,000 1,000P 1,000P = 50,000 P = $50 D. Q = 50,000 1,000P