Reference no: EM132445124

1. Cool-Aire Corporation manufactures a line of room air conditioners. Its breakeven sales level is 33,000 units. Sales are approximately normally distributed.

Expected sales next year are 40,000 units with a standard deviation of 4,000 units.

a. Determine the probability that Cool-Aire will incur an operating loss.

b. Determine the probability that Cool-Aire will operate above its break-even point.

2. Television channel operating profits vary from as high as 45 to 55 percent at MTV and Nickelodeon down to 12 to 18 percent at NBC and ABC. Provide a Porter Five Forces analysis of each type of network. Why is MTV so profitable relative to the major networks?

3. Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT (UNITS) TOTAL COST ($)

10                                   $110

15                                    150

20                                    180

25                                    225

30                                    300

35                                    385

40                                    480

a. Calculate a marginal cost and an average cost schedule for the firm.

b. If the prevailing market price is $17 per unit, how many units will be produced and sold? What are profits per unit? What are total profits?

c. Is the industry in long-run equilibrium at this price?