05 Jun Question 3. (15 points) Breakaway Tours, Inc., has estimated the following multiplicative demand function for packaged holiday tours in the Flushing, New York, market using quarterly data covering the past five years (20 observations): QY = 5PY-2.5PX-0.86Y1.76A1.4 Here, QY is the quantity of tours sold, PY is average tour price, PX is average price for some other good, A is tour advertising, and Y is per capita disposable income. a. (3) What is the price elasticity of demand for tours? Interpret your answer. Given this elasticity, should Breakaway increase prices to increase revenue? Explain. b. (3) Are tours a normal good? Explain. c. (3) What is the relationship between Goods X and Y? How strong is this relationship? Explain each answer well. d. (3) Does advertising seem effective for this company? Explain. e. (3) What does the demand function above suggest about the relationship of each variable to each other? Does elasticity ever change if the values of PY, PX, Y, or A change? Explain. 4. (23 points) Just Bikes, Inc., sells tricycles, in partially-assembled and fully assembled forms. Parents who assemble their own tricycles benefit from the lower price of $40 per tricycle. “Full-service” customers enjoy the luxury of an assembled tricycle, but pay a higher price of $60 per tricycle. Both partially and fully assembled tricycle prices are stable. The company has observed the following relation between the number of assembly workers employed per day and assembled tricycle output: Number of Workers per day Finished Tricycles 0 0 1 8 2 14 3 18 4 21 5 23 a. (8) Construct a table showing the (net) marginal revenue product derived from assembly worker employment. b. (10) How many assemblers would Just Bikes employ at a daily wage rate of $100? Explain your answer and show all calculations. c. (5) What is the highest daily wage rate Just Bikes would pay to hire three assemblers per day? 5. (10 points) Describe the difference between a diminishing marginal product of labor and a negative marginal product of labor. Why would a profit-maximizing firm always choose to operate where the marginal product of labor is decreasing (but not negative)?
c market using quarterly data covering the past five years (20 observations):
QY = 5PY-2.5PX-0.86Y1.76A1.4
Here, QY is the quantity of tours sold, PY is average tour price, PX is average price for some other good, A is tour advertising, and Y is per capita disposable income.
a. (3) What is the price elasticity of demand for tours? Interpret your answer. Given this elasticity, should Breakaway increase prices to increase revenue? Explain.
b. (3) Are tours a normal good? Explain.
c. (3) What is the relationship between Goods X and Y? How strong is this relationship? Explain each answer well.
d. (3) Does advertising seem effective for this company? Explain.
e. (3) What does the demand function above suggest about the relationship of each variable to each other? Does elasticity ever change if the values of PY, PX, Y, or A change? Explain.
4. (23 points) Just Bikes, Inc., sells tricycles, in partially-assembled and fully assembled forms. Parents who assemble their own tricycles benefit from the lower price of $40 per tricycle. “Full-service” customers enjoy the luxury of an assembled tricycle, but pay a higher price of $60 per tricycle. Both partially and fully assembled tricycle prices are stable. The company has observed the following relation between the number of assembly workers employed per day and assembled tricycle output:
Number of
Workers
per day
Finished
Tricycles
0
0
1
8
2
14
3
18
4
21
5
23
a. (8) Construct a table showing the (net) marginal revenue product derived from assembly worker employment.
b. (10) How many assemblers would Just Bikes employ at a daily wage rate of $100? Explain your answer and show all calculations.
c. (5) What is the highest daily wage rate Just Bikes would pay to hire three assemblers per day?
5. (10 points) Describe the difference between a diminishing marginal product of labor and a negative marginal product of labor. Why would a profit-maximizing firm always choose to operate where the marginal product of labor is decreasing (but not negative)?
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.