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January 24, 2020

MT445Assignment-Unit3

Business Finance - Operations Management

1. Explain the relationship between the price elasticity of demand and total revenue.

2. 2. Is the price elasticity of gasoline more elastic over a shorter or a longer period of time? Explain.

3. 3. Determine whether each of the following is an explicit cost or an implicit cost:

a) Payments for rented manufacturing equipment

b) A firms use of a warehouse that it owns and could rent to another firm

c) Wages paid to the firms workers
d) The wages the firms owner could earn if he worked for another company

4. Consider the following information in the table for Pats 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 Pats Pizza Restaurant minimizing cost?
b. Should he rent more ovens and hire fewer workers or rent fewer ovens and hire more workers? Explain.

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