Managerial_Economics

Unit 3 Assignment Student Name: Rosiland HesterHester Please answer the following questions. Submit as a Microsoft Word® document to the Dropbox when completed. 1. Explain the relationship between the price elasticity of demand and total revenue. If demand is price inelastic, an increase in price will lead to increase in revenue because the percentage increase in price will cause a smaller decrease in quantity demand. If demand is elastic, an increase in price will lead to a decrease in revenue because the percentage increase in price will cause more reduction in quantity demanded. 2. Is the price elasticity of gasoline more elastic over a shorter or a longer period of time' Explain. It is more elastic in the long run, because people have option to turn to solar and wind energy. 3. Determine whether each of the following is an explicit cost or an implicit cost: a) Payments for rented manufacturing equipment Implicit b) A firm’s use of a warehouse that it owns and could rent to another firm Implicit c) Wages paid to the firm’s workers Implicit d) The wages the firm’s owner could earn if he worked for another company Explicit 4. Consider the following information in the table for Pat’s Pizza Restaurant and answer the questions below. |Marginal Product of Capital |4,000 | |Marginal Produce of Labor |100 | |Wage Rate |$10 | |Rental Price of Pizza Ovens |$500 | a. Is the owner of Pat’s Pizza Restaurant minimizing cost' Yes b. Should he rent more ovens and hire fewer workers or rent fewer ovens and hire more workers' Explain. I think he should hire more workers than to rent more ovens because he would save more. Directions for Submitting your Assignment Complete your assignment in this Microsoft Word® document and save it as Username-MT445Assignment-Unit#.doc (Example:TAllen-MT445Assignment-Unit3.doc). Submit your file by selecting the Unit 3: Assignment Dropbox by the end of Unit 3.