1. What is the production possibilities curve and how is it useful?
2. What 4 factors contribute to determining any point in this model?
3. How would we apply this framework to the real world?
4. You are planning to expand your burgeoning business of Bill Murray themed athletic shoes that were prominently featured in the Life Aquatic with Steve Zissou (which happens to be the greatest movie of all time), and you need to determine your cost structure to ensure that you price your products properly. Rent on the new production facility is 5,000 per month. Insurance is 6,000 annually. Each T-shirt costs you 5.00 and an additional 3.00 for materials. You purchase your T-shirts by the pallet, which contains 1,000 in each. However, if you purchase 2 pallets of T-shirts at a time, then you get a 10% discount. If you purchase 2 pallets of T-shirts, then you get a 20% discount.
Construct a table of your monthly costs reflecting fixed and variable costs. Be sure to pay very careful attention to the details...
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Quantity
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TFC
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TVC
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TC
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AVC
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MC
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0
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1
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2
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3
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5. Ride hailing services utilize a dynamic pricing model. Using supply and demand tools (you don't have to actually show the graphs... but they may help you on scratch paper) illustrate how microeconomics explains the shifts in pricing and how it describes the real world scenarios of trying to get a ride at various times of the day. Be sure to consider the morning and evening commute, in addition to the weekend hours.
6. Disney World has doubled their ticket prices at their amusement parks over the last 10 years, which of the economic market models we covered explains this behavior? Be sure to take into account that competitor parks are nearby. Be sure to detail how this model works and why it fits the Disney World situation.