Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 4, Problem 20PAA
To determine
(a)
The graphical representation of the profit function, and to analyze the effect on output and profits if a company compensates sales managers solely based on output.
To determine
(b)
To analyze:
The effect on output and profits if a company compensates sales managers solely based on profits.
To determine
(c)
To analyze the effect on output and profits if a company compensates sales managers based on profits and output.
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You are the manager of a firm that specializes in small single-board widgets.Your goal is to determine the number of units (Z) that must be produced and sold by your firm each month in order to maximize profits. The total benefits (revenues) and costs to your firm of producing various quantities are given in the first three columns of the following table. Based on this scenario, complete the table and answer the accompanying questions:
Control Variable
(Z)
Total Benefits
B(Z)
Total Cost
C(Z)
Net Benefits
N(Z)
Marginal Benefit
MB(Z)
Marginal Cost
MC(Z)
Marginal Net Benefit
MNB(Z)
0
0
0
1
200
10
2
380
30
3
540
60
4
680
100
5
800
150
6
900
210
7
980
280
8
1040
360
9
1080
450
10
1100
550
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Chapter 4 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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