Ask Question, Ask an Expert

+61-413 786 465

Ask Microeconomics Expert

Include assumptions about the elasticity of the demand and market structure for the company’s good or service. Analyze data to determine fixed and variable costs.

Answer the following problems with justification:

i) How will you increase revenue?

ii) How will you determine the profit-maximizing quantity?

iii) How could you use the concepts of marginal cost and marginal revenue to maximize profit? What information do you need to determine this? Without this information, how would you make a decision?

iv) Are there other ways to minimize costs for the product?

Thomas Money Service Inc. Scenario

Thomas Money Service Inc. has been in business since 1940. It started out as the consumer finance company granting small loans for the household needs. Over the following 5 years, company expanded its services by issuing business loans, business acquisition financing, and commercial real estate loans.

In 1946, decision was made to branch out into equipment financing. Subsidiary named Future Growth Inc. (FGI) was established. This decision turned out to be very profitable. Because of the end of World War II, society had huge demand for the construction and forestry equipment. Because of increasing demand for this type of equipment, FGI decided to make very daring move in 1951 and purchased the equipment manufacturing company. Now they can build, sell, and finance their own brand of building and forestry equipment. FGI discontinued financing other brands of equipment.

For 67 years, FGI had been able to truthfully state that they have continuously increased profits year after year, even during economic downturns, and have never laid off workers. This track record has allowed their stock to grow from $5.00 to $85.60 with six stock splits from 1975 to 1998. FGI has never issued bonds, and the present stock value is $35

Current global downturn has caused the American economy to suffer. Oregon, Washington, and several other forestry states have encountered flooding, massive fires, and protest from animal activists. For the first time in the FGI history, profits declined—down 30% from last year—and they had to lay off one-third of their workforce.

Falling economy has also caused a drop in new-home sales: sales dropped 30% from the previous year and additional declines are expected. This has caused a domino effect throughout the entire construction industry. Not all sectors, however, are being hit equally by the economy. Opportunities are in hospitals and nursing homes that have a demand for new buildings.


• There are currently many domestic and international companies manufacturing construction and forestry equipment. Each company’s equipment offers slightly different features and functions that allow market to supply many substitutes.
• FGI has repossessed over 500 pieces of equipment during the past year. They have bundled the pieces together and determined an average price for each piece. Present selling price is $1,732. Below are the demand figures for each price.

Demand data in millions in the past years

Price                     Demand
1,990.1                 123

1,732.0                 182

1,634.3                 350

1,252.0                 380

732.1                    400

622.3                    456

• In recent years, FGI had decreased its advertisement revenue, selecting to have the commercial during the Super Bowl and a few other sporting events.

FGI has cut down on manufacturing because of the lack of demand. Below is the combined production cost for construction and forestry equipment. What level of demand generates the greatest net income?

1855_productin cost.jpg

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9436

Have any Question? 

Related Questions in Microeconomics

Question you are on the city council and are considering a

Question: You are on the city council and are considering a law to control rents below the free-market rent. What would be the effect of this rent control law in the short-run? In the long run? Be sure to explain why you ...

Question you are an assistant to a senator who chairs an ad

Question: You are an assistant to a senator who chairs an ad hoc committee on reforming taxes on telecommunication services. Based on your research, AT&T has spent over 15 million on related paperwork and compliance cost ...

Question suppose the us government decides to reduce

Question: Suppose the U.S. government decides to reduce military spending. Using the Simple Keynesian model, describe graphically the impact of this event on equilibrium real GDP. If equilibrium real GDP was equal to its ...

Question briefly explain whether you agree with the

Question: Briefly explain whether you agree with the following statement: "The longer the period of time following an increase in the demand for apples, the greater the increase in the equilibrium quantity of apples and ...

Question 1 identify and evaluate consequences of government

Question: 1. Identify and evaluate consequences of government price supports and subsidies in U.S. farming markets. 2. Do rent ceiling laws for apartments result in an efficient allocation of apartment units? Why or why ...

Question scenario using the same organization and the

Question: Scenario: Using the same organization and the lemonade drink from the Week 4 Learning Team assignment, develop an analysis for the bank. The bank will be using this information to make their final decision on h ...

Question consider the industry in which you work or one

Question: Consider the industry in which you work, or one about which you have some knowledge. What are the costs and benefits associated with attempting to bar entry of other firms into this industry? How would a firm e ...

Question in the 1970s a big increase in the federal budget

Question: In the 1970s, a big increase in the Federal budget deficit was not offset by higher interest rates, so the rate of inflation tripled. In the 1980s, a big increase in the deficit was offset by higher interest ra ...

Question abc explosives has purchased fire nsurance for its

Question: ABC Explosives has purchased fire nsurance for its factory. It can institute a fire prevention program, which would cost $90, but which would lower the probability of a fire from 0.01 to company cannot determin ...

Quesiton the catch-phrase of the eitc is make work pay to

Quesiton: The catch-phrase of the EITC is "Make work pay." To what extent does the EITC achieve its goal of encouraging work among low-income individuals? Are the results in line with predictions from economic theory? Ca ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As