Question: Suppose that in addition to the costs in Problem 4, you have already committed to paying $100 to your mechanic for parts she has ordered.

Suppose that in addition to the costs in Problem 4, you have already committed to paying $100 to your mechanic for parts she has ordered.
a. Write out your cost function mathematically and graph it.
b. What is your best choice?
c. Suppose your mechanic tells you that she can return the parts she has ordered and you wouldn't need to pay the $100 if you do no repair work. What is your cost function now? What is your best choice? Now if you get no repair work, you can avoid paying the $100 - it is no longer a sunk cost. Look at Read More Online 3.4 and try using the two-step procedure described in the Appendix to find your best choice.
d. How would your answers to parts (a)-(c) change if the cost the parts your mechanic ordered had been $200?

Step by Step Solution

★★★★★

3.32 Rating (164 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a 100H 120H 2 100 b Your best choice is to hire your mechanic for 1 hour c If the mechanic can retur... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

847-B-E-D-S (2620).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

A: Suppose the production process for a firm is homothetic and has decreasing returns to scale. (a) On a graph with labor on the horizontal and capital k on the vertical axis, draw an isoquant...

Oligopoly, Increasing Returns, Tariffs and FD/. Recall from Chapter 3 that one motivation for setting up a branch plant in a foreign country is to avoid transport costs and tariffs, but this has to...

live with that, where we really jerk them around is with the changes in orders. One minute our field service people tell us they've run out of something and they need delivery immediately. In many...

Case study 11.1: Carls Computers (All 4 Questions) Using the data on the two part numbers given, provide a comprehensive evaluation of the ordering policies. Compare the present annual average cost...

BUSINESS CASE ANALYSIS 4 There was no question about Mark's genius. Seven years ago he decided to enter the competitive nightmare that the personal computer business had become. Although on the...

Case Study: Carl's Computers There was no question about Carl's genius. Seven years ago he decided to enter the competitive nightmare that the personal computer business had become. Although on the...

Tiger speed computer inc. There was no question about Johns genius. Seven years ago, he decided to enter the competitive nightmare that the personal computer business had become. Although on the...

Tiger speed computer inc. There was no question about John's genius. Seven years ago, he decided to enter the competitive nightmare that the personal computer business had become. Although on the...

17 In a normal market, when the price of security equals the present value of the cash flows paid by the security is called?

There are two type of visits in the pediatric unit where you work: Routine (last 30 minutes on average), and Complex (last 1 hour on average). From the statistics budget you expect to have 25,000...

NoGrowth Corporation currently pays a dividend of $ 0 . 5 4 per quarter, and it will continue to pay this dividend forever. What is the price per share of NoGrowth stock if the firm's equity cost of...

What is the relationship between the project budget and the cost baseline? a) The cost baseline is the approved version of the project budget b) The project budget is created after the cost baseline...

If a car rental company charges $6 a day and 8\\\\zeta a mile to rent one of its cars, then the cost z , in dollars, to rent a car for x days and drive y miles can be found from the equation\...

please solve it quickly Question 21 You have purchased a put option on ABC common stock for $2 per contract. The option has an exercise price of $55. What is your net profit on this option if stock...

Back to Assignment Attempts: Score: /4 2. Problem 7-13 eBook Problem 7-13 An investment offers to pay you $11,000 a year for three years. If it costs $26,422, what will be your rate of return on the...