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Problem
The Einstein Co has the following information:
Capacity in units 6,000 Sales in units 4,500 Sales Price $ 60.00 VC per unit $ 42.00 FC per unit $ 20.00
Colt Co. wants to buy a special order of 1200 units for $55.00 each.
1. What is the current total profit/loss and per unit profit/loss? 2. What is the special order total profit/loss and per unit profit/loss? 3. Should Einstein accept or reject the special order? 4. What is the minimum price that Einstein should accept? 5. If Einstein does not have capacity, does that change your answer?
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
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