Assignment 4: Automotive Production Levels General Motors Shelia Lott Eco 550 - Managerial Economics and Globalization Dr. John Ilokwu Ph.D. September 5, 2012 General Motors Company General Motors Corporation (GM) is the largest company in an industry that has a major impact on the American economy and in the world. GM has led the auto industry in innovation and for most of the 20th century. From 1931 to 2008 GM led in the industry only to be surpassed by Toyota in 2008. After
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total cost are compared is the largest positive gap or profit gained between total revenue less total cost. In the table provided the largest profit or profit maximization would be $540. When you produce 8 items profit is at its highest point. To calculate total revenue you take the price times the quantity and to calculate total cost you take the sum of variable and fixed costs. 2. The profit maximization approach used when marginal revenue and marginal cost are compared is to take the marginal revenue
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Marginal revenue is a gain to a company from an additional unit of a product; which is additional income from selling one more unit of a good. Marginal revenue is the change in total revenue, with respect to the variable that is changing. (McConnell & Brue, 2012) Total revenue is equal to the price that can be charged consistent with selling a given quantity. Total revenue is considered the total sales revenue and other revenue for a particular period. (McConnell & Brue, 2012) Marginal revenue is
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The table given below represents the marginal valuation of a beekeeper (collecting honey) and an orchard farmer (producing mangoes). The beekeeper’s opportunity cost reflects the loss in honey collection resulting from the usage of the same orchard again and again. Table 1 Days used Total honey value ($) Marginal honey value ($) Beekeeper's opportunity cost ($) Total value of mangoes ($) Marginal value of mangoes ($) 1 18 18 2 10 10 2 23 6 2 17 7 3 27 5 2 23 6 4 30 3 2 28 5 5 32 2 2 32 4
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Revenue-Total Cost method and the Marginal Revenue-Marginal Cost method. A1. In the Total Revenue-Total Cost method, the profit is equal to the total revenue less the total cost. When given a table of revenues and costs such as the table in this case, the profit maximization point in this method is reached when the difference in total revenue less total cost is at its max. A2. In the Marginal Revenue-Marginal Cost method, for each unit sold, the Marginal Profit is equal to Marginal Revenue less
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Profits are total revenue minus total costs. A little algebra shows that we can compute profits from average revenue and average costs at any level of q: π =TR−TC π = TR − TC qqq TR = AR q TC = ATC q π = AR − ATC q π =(AR−ATC)q The equation says that we take average revenue minus average total cost (that’s profit per unit) and multiply times the number of units to get profits. In the graph, this computation is simply the area of the shaded rectangle. An oligopoly is a market dominated
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revenue (TR) vs. total cost (TC). Total revenue is quantified as a firm’s total profit intake from sales of a product or service delivered. This is total amount of revenue that was derived from consumer spending. Total cost, however, includes all the purchases of raw materials, labor, production, transportation, distribution or any other cost incurred by this particular firm for this particular product or service. In order to calculate profitization, you must subtract the total cost from the total revenue
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price discrimination because the firm saves on handling large orders (Salvatore, 2012, p. 492). Large orders can be shipped at a lesser price compared to smaller orders, saving on shipping cost. There are many companies that reduce the price of the product if the company buys in bulk. In addition, larger orders cost less than smaller orders when dealing with production. For example, if a manufacturing wanted to make only 5 items the time spent on making that smaller order would take just as much time
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result of the difference between actual and budgeted sales quantity. 1. Formula Sales Volume Variance (where absorption costing is used): = (Actual Unit Sold - Budgeted Unit Sales) x Standard Profit Per Unit Sales Volume Variance (where marginal costing is used): = (Actual Unit Sold - Budgeted Unit Sales) x Standard Contribution Per Unit 2. Explanation Sales Volume Variance quantifies the effect of a change in the level of sales on the profit or contribution over the period. Sales
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Marginal Cost Based Pricing in Transport Key Implementation Issues from the Economic Perspective Erik Verhoef, Free University Amsterdam Paper prepared for IMPRINT 1. Introduction Marginal cost pricing in transport is a ‘hot’ topic, in at least two senses. First, as is well known, over the last decade(s), sophisticated pricing policies in transport have evolved from a primarily academic, theoretical construct, to a realistic and seriously considered option for many areas – urban and non-urban
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