Chapter 1: 6LO (page 27)
Apply marginal analysis to determine the optional level of a managerial control variable.
The managerial control variable should be increased up to the point where marginal benefits equals marginal costs.
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two months ago, the owner of a car dealership (and a current football star) significantly changed his sales manager’s compensation plan. Under the old plan, the manager was paid a salary of $6,000 per month; under the new plan, she receives 2 percent of the sales price of each car sold. During the past two months, the number of cars sold increased by 40 percent. But the dealership’s margins (and profits) significantly declined. According to the sales manager, “consumers are driving harder bargains and I have had to authorize significantly lower prices to remain competitive. “What advice would you give the owner of the dealership?
You are the human resources manager for a famous retailer, and you are trying to convince the president of the company to change the structure of employee compensations. Currently, the company’s retail sales staff is paid a flat hourly wages of \(20 per hour for each eight-hour shift worked. You propose a new pay structure whereby each salesperson in a store would be compensated \)10 per hour, plus 1 percent of that store’s daily profits. Assume that, when run efficiently, each store’s maximum daily profits are $25,000. Outline the arguments that support your proposed plan.
The head of the accounting department at a major software manufacturer has asked you to put together a pro forma statement of the company’s value under several possible growth scenarios and the assumption that the company’s many divisions will remain a single entity forever. The manager is concerned that, despite the fact that the firm’s competitors are comparatively small, collectively their annual revenue growth has exceeded 50 percent over each of the last five years. She has requested that value projection be based on the firm’s current profits of $3.2 billion (which have to be paid out to stockholders) and the average interest rate over the past 20 years (6 percent) in each of the following profit growth scenarios:
a. Profits grow at an annual rate of 9 percent. (this one is tricky.)
b. Profits grow at an annual rate of 2 percent.
c. Profits grow at an annual rate of 0 percent.
d. Profits decline at an annual rate of 4 percent.
Suppose the total benefit derived from a continuous decision ,is role="math" localid="1657557240837" and the corresponding total cost is , so that and .
What is the total benefit when9
What is the marginal benefit when
What level of Q maximizes total benefit?
What is the total cost when
What is marginal cost when
What level of Q maximizes net benefit?
Brazil points to its shrimp-farming industry as an example of how it can compete in world markets. One decade ago, Brazil exported a meager 400 tons of shrimp. Today, Brazil exports more than 58,000 tons of shrimp, with approximately one-third of that going to the United States. Brazilian shrimp farmers, however, potentially face a new challenge in the upcoming years. The southern shrimps Alliance-a U.S. organization representing shrimp-producing countriesselling shrimp below “fair market value.” The organization is calling for the United States to impose a 300 percent tariff on all shrimp entering the united states’ borders. Brazilian producers and the other five countries named in the complaint counter that they have a natural competitive advantage such as lower labor costs, availability of cheap land, and a more favorable climate, resulting in a higher yield per acre and permitting three harvests per year. In what many see as a bold move, the American seafood distributors Association-an organization representing supermarkets, shrimp processors, and restaurants- has supported Brazilian and other foreign producers, arguing that it is the southern shrimp alliance that is engaging in unfair trade practices. Describe the various rivalries depicted in this scenario, and then usethe five forces framework to analyze the industry.
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