econ questions 9

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Answer the following questions with a small paragraph

  • The San Diablo dam has electricity generating turbines on a chute that connects lower and upper reservations. During the day, water is drained from the upper reservoir to the lower to produce electricity. But at night, electricity is used to pump the water back up to the upper reservoir. Since the water is just going back and forth how can wealth be generated?
  • Raymond decides to set up a lemonade stand every weekend for the next four weeks to save up for the latest x-men comic. He has to pay his brother Robert $10 as a one-time payment for him to not bully Raymond or drive his customers away. The lemon and sugar cost $10 (The water is free) and his dad offers to set up his stall for him. He ends up making $15 his first weekend. Frank, his father notices this and advises Raymond to shut down the stall, while Marie his mother advises him not only to set up the stall next weekend but to increase production even more. Raymond is extremely confused. Who do you think he should listen to and WHY?
  • Prescott Labs is considering developing a defibrillator product. You know that will require extensive testing and possible modification before it can be launched. Still, you know that even if it is launched two years from now, the present value of sales over the expected 10 years product lifecycle will cover these costs. But now the boys down at the lab tell you that it may not launch for three years. How does this affect your assessment of going ahead with funding the product?
  • The Lunchbox is new food truck that is one of many options for workers in Chicago, IL to get a quick and testy meal at reasonable prices. The owners wanted to raise prices but did not know if the demand would fall off too much. They decided to raise prices and wait and see before making the increases permanent. In the first week after they raised prices on the menu an average of 10%, they served fewer lunches, but their revenue did not fall. Based on this, decided to keep the new menu. Would you expect revenue to continue at this level in the future?
  • Every year various business magazines ranked the quality of the different MBA programs. Why don’t all prospective students flock to the highest ranked program?
  • A buyer for department store must decide on which deigns the store will carry before she knows what the demand will be in the coming season. Choosing poorly demand design means lots of unsold merchandise and losses that $200,000 an average. Passing on a highly demand design means lots of unsold merchandise and missing out on profits that are $300,000 on average. So long as she is more than 40% confidant that the design will be successful, carrying the design will minimize expected decision error costs. Why might she opt to carry designs only if she is more than 50% confidant of success?
 
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