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The investors of Smith Autos have put up $500,000 to construct a building and purchase all equipment required to wash cars. The investors expect to earn a minimum return of 10% on their investment. If the money to set up the business had been borrowed from a bank instead, the car wash owners would have paid a 10% interest rate. The car wash is open 50 weeks per year and washes 800 cars per week. Whether operative or not, the company must pay $1,000 per week return to investors and $1,000 per week as insurance. The variable costs for the 800 weekly washes includes $1,000 labor cost and $600 materials cost. There are many car washes of equal quality and service in the area and they charge $5 per car wash.
a) Based on your knowledge of the different forms of market structure, do you think Smith Autos should stay in business? Show calculations.
b) Graphically represent the company's performance, showing profit or loss.
c) Another car wash company operates inside a gated community in the vicinity and offers its services at $6 per wash under a licensed agreement. Highlight how is it possible for this company to charge a higher price than the market and still stay in business.
d) After a few mouths, due to the forces of demand and supply, the market price is pushed down to $1.5 per car wash. What course of action will you suggest to Smith Autos?
Suppose Suzuki has the following demand and supply function for Cultus VXL:
Qd = 55 - 5P Qs = -50 + 10P
After the government decided to impose tax on the production of Cultus VXL, the new supply function:
Qs = -60 + 10P
i) Find out the equilibrium price and quantity before tax.
ii) Find consumer and producer surplus before tax.
iii) Determine government revenue and dead weight loss after tax.
explain an increase in demand for notebooks raises the quantity of notebooks demanded but not the quantity supplied?
Enunciate theoretical as well as diagramatical equation of demand?
Inayah is a rational consumer who consumes milk and cookies only from her monthly income of Rs. 1,500. If the price of milk is Rs. 500 per liter and the price of one pack of cookie is Rs. 300, answer the following questions:
a) Given the information above write the equation of the budget line and illustrate the same through the two-dimensional labeled diagram.
b) If Inayah spends all of her income on consuming one good, find:
i. how much cookies she could afford?
ii. how much milk she could consume?
c) Identify the impact of an increase in the income from Rs. 1,500 to Rs. 1,800 on Inayah’s consumption level. Also illustrate it using the two-dimensional labeled diagram.
The investors of Smith Autos have put up $500,000 to construct a building and purchase all equipment required to wash cars. The investors expect to earn a minimum return of 10% on their investment. If the money to set up the business had been borrowed from a bank instead, the car wash owners would have paid a 10% interest rate. The car wash is open 50 weeks per year and washes 800 cars per week. Whether operative or not, the company must pay $1,000 per week return to investors and $1,000 per week as insurance. The variable costs for the 800 weekly washes includes $1,000 labour cost and $600 materials cost. There are many car washes of equal quality and service in the area and they charge $5 per car wash.
a) Based on your knowledge of the different forms of market structure, do you think Smith Autos should stay in business? Show calculations. (2 Marks)
b) Graphically represent the company's performance, showing profit or loss. (1 Mark)
c) Another car wash company operates inside a gated community in the vicinity and offers its services at $6 per wash under a licensed agreement. Highlight how is it possible for this company to charge a higher price than the market and still stay in business. (1 Mark)
After a few mouths, due to the forces of demand and supply, the market price is pushed down to $1.5 per car wash. What course of action will you suggest to Smith Autos?
Enunciate theoretical as well as diagramatical equation of demand, differntiate between quantity demand and quantity demanded
Differentiate between a long-run and a short-run cost function. 5
(b) (i) Describe the relationship between the short-run and long-run average cost curves. 5
(ii) Why the long-run average cost curve also called the envelope curve? 5
(iii) Using an appropriate diagram, explain how does the long-run marginal cost derived? 5
Consider U=q2+q2
Derive the Mashallian dd function from q1 and q2.
Imagine that you an expert of microeconomics. You have been approached by ms Lynn, a young graduate business lady who selling local breed chickens(kuchi) from singida at the price of Tshs 30000 per chicken. Ms Lynn has about 100 customers, each one with own individual demand curve. Ms Lynn has approached you as an expert to assist her identifying some key microeconomics aspects which she should explore as she wants to increase herrevenue from the selling chickens
#340153 on Dec 2023