Economics of Enterprise Answers

Suppose it costs XYZ Airline 120,000 dollars to fly its 500 - seater A380 passenger plane from Dubai to London. The flight service does not include drinks/meal. The passengers pay for food and drinks separately on demand.   

(a): What is the average cost of a Dubai – London seat on this plane?

(b): Currently XYZ airline charges 550 dollars for a Dubai-London ticket (economy) on this plane. Suppose 10 economy seats are left unsold when the plane is starting to board the passengers. A standby passenger offers to pay 250 dollars for a seat. Should the airline sell the ticket to this passenger at 250$? Yes or No? Briefly explain your reason.  

When the price of good A is P 40/ pair, the quantity for good B is 500 units. When the price increases by P 10 per unit, the demand for good B increases by 100 units. Compute the cross-price elasticity and determine the type of good.

The store sells a special item whose daily demand can be described by the

following pdf:

Daily demand D 0 1 2 3

P(D) 0.15 0.3 0.45 0.1

The store is comparing two ordering policies: (1) Order up to 3 units every

3 days if the stock level is less than 2, else do not order. (2) Order 3 units if the

stock level is zero, else do not order. The fixed ordering cost per shipment is $200.

Immediate delivery is expected.

Which policy should the store adopt to minimize the total expected daily

cost of ordering?

The country Autarka does not allow international trade. In Autarka, you

can buy a wool suit for 3 ounces of gold. Meanwhile, in neighboring countries,

you can buy the same suit for 2 ounces of gold. If Autarka were to allow free trade,

would it import or export wool suits? Why?

1.  H&M has been selling 15,000 jackets per month for 355 ETB. When they increased the price to 500 ETB, they sold only 12,000 Jackets. What is the demand elasticity? If the marginal cost is 250 per Jacket, what will be the desired markup price? Was raising the price profitable?

The daily demand for a product in a shop can assume one of the following values: 100, 200, or 300 items with probabilities 0.2, 0.5 and 0.3. The owner of the store is thus limiting the alternatives to stocking one of the indicated three levels. If the owner stocks more that it can be sold in the same day the remaining items must be disposed at a discount price of 50 cents per item. Assume that the owner pays 80 cents per item and sells it for 120 cents, find the optimal stock level.

How would each of the following affect the Pakistan market supply curve for corn?

a. A new and improved crop rotation technique is discovered.

b. The price of fertilizer falls.

c. The government offers new tax breaks to farmers.

A firm borrows P2,000 for 6 years at 8%. At the end of 6 years, it renews the loan for the amount due plus P2,000 more for 2 years at 8%. What is the lump sum due?

QD = 25 - 3P and QS = 10 + 2P, write the inverse demand function

Suppose that the utility function for two

commodities is given by U = x² y³ and the budget constraint is 10x + 15y = 250. Find the values of x and y that maximize utility