Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

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.

Data

• 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 older business cycle theories used to focus on

Question: Older business cycle theories used to focus on what was called the ‘‘interaction of the multiplier and the accelerator'' to produce endogenous business cycles; the accelerator said that investment was proportio ...

Question read the following letter from a magazine

Question: Read the following letter from a magazine publisher: Dear Parent: Currently your Growing Child/Growing Parent subscription will expire with your 24-month issue. To renew on an annual basis until your child reac ...

Question what is the equivalent amount in year ten of an

Question: What is the equivalent amount in year ten of an expenditure of $5,000 in year one, $6,000 in year two, and amounts increasing by $1,000 per year through year ten? The response must be typed, single spaced, must ...

Question how does a government agency raise revenue

Question: How does a government agency raise revenue differently from a private company, and how does that affect the way government decisions are made, compared to business decisions? The response must be typed, single ...

Question also during the 1990s the ratio of capital

Question: Also during the 1990s, the ratio of capital spending to GDP rose, while the personal saving rate declined almost to zero. The profit ratio did not rise very much; hence almost the entire increase in saving came ...

Question what were the business cycles and long-term trend

Question: What were the business cycles and long-term trend of the economy from the 1960s to now, and the main factors behind its growth? The response must be typed, single spaced, must be in times new roman font (size 1 ...

Question the brazilian real devalued by approximately 40 in

Question: The Brazilian real devalued by approximately 40% in 1999. Assume that Brazil's largest trading partner is Argentina. What effect would this eventually have on the Argentine peso even if that country had a balan ...

Question you just overheard your friend say the following

Question: You just overheard your friend say the following: "Poor countries like Malawi have no absolute advantages. They have poor soil, low investments in formal education and hence low-skill workers, no capital, and n ...

Question the united states currently uses a voting system

Question: The United States currently uses a voting system called "first past the post" in elections, meaning that the candidate with the most votes wins. What are some of the problems with a "first past the post" system ...

Question there are conflicting answers to this online

Question: There are conflicting answers to this online. Please, only respond if you are certain of your answers, and can explain. Don't just paste what is already out there. I'm trying to learn. Suppose that the interest ...

  • 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