Reference no: EM131509266
ASSIGNMENT
Q1. The following table shows Jeffrey's monthly total benefit from exercising at a fitness club. For example, if he goes to 10 sessions at the fitness club during the month, his total benefit from exercising is $ 319.
|
Number of Sessions
|
Total Benefit ($)
|
|
0
|
0
|
|
1
|
$30
|
|
2
|
$70
|
|
3
|
$135
|
|
4
|
$195
|
|
5
|
$245
|
|
6
|
$280
|
|
7
|
$300
|
|
8
|
$315
|
|
9
|
$324
|
|
10
|
$319
|
a) What does the total benefit from exercising represent and where do these benefits come from? Explain.
b) Suppose the fitness club charges $10 per session. How many fitness sessions would Jeffrey go to each month? Explain or show how you arrived at your answer.
c) Suppose instead the fitness club charges a membership fee of $100 per month. How many fitness sessions would Jeffrey go to each month? Explain or show how you arrived at your answer.
d) Suppose instead the fitness club charges a membership fee of $80 per month. How many fitness sessions would Jeffrey go to each month? Explain or show how you arrived at your answer.
Q2. A charity is organizing a fundraiser in one month from today. It has already paid non-refundable deposits of $500 for the venue and $400 for the entertainers. If the charity proceeds with the event, it must pay another $2,500 for the venue, another $1,200 for the entertainers on the day and $30 per person for food. These expenses must be paid three days before the event. The charity has been selling tickets to the fundraiser for $76 per person but tickets sales have been slow. Four days before the event, the charity has only sold 82 tickets and does not expect to sell any more tickets. Should the charity proceed with the event? Explain or show how you arrived at your answer.
Note: If the charity does not proceed with the event, it would refund the cost of tickets already sold.
Q3. Captain Highliner owns six fishing boats. He can send each boat to North River or to East Bay. The table on the next page shows the average catch per boat based on the number of boats in each area. For example, if all five boats are sent to North River, the average catch is expected to be kilograms of fish per boat.
The Captain wants to catch the most fish. Where would he send the 1st boat, 2nd boat, 3rd boat, 4th boat, 5th boat and 6th boat? Explain or show clearly how you arrived at your answer.
Hint: What pitfall in economic decision-making must you avoid?
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Number of Boats in North River
|
Average Catch (kilograms per boat)
|
|
|
Number of Boats
in East Bay
|
Average Catch (kilograms per boat)
|
|
|
|
0
|
-
|
|
|
0
|
-
|
|
|
|
1
|
150
|
|
|
1
|
100
|
|
|
|
2
|
130
|
|
|
2
|
97
|
|
|
|
3
|
115
|
|
|
3
|
95
|
|
|
|
4
|
105
|
|
|
4
|
93
|
|
|
|
5
|
95
|
|
|
5
|
84
|
|
|
|
6
|
80
|
|
|
6
|
76
|
|
|
Q4. A tattoo shop produces an average of 80 tattoos (of similar type and size) each month. Its fixed costs are $2,800 per month and its variable costs are $90 per tattoo.
a) Give two specific examples of expenses that are part of the tattoo shop's fixed costs. Be precise.
b) Give two specific examples of expenses that are part of the tattoo shop's variable costs. Be precise.
c) What is the tattoo shop's average cost of producing each of the 80 tattoos? Explain or show how you arrived at your answer.
d) What is the tattoo shop's marginal cost of producing the 80th tattoo? Explain or show how you arrived at your answer.
e) What is the minimum amount of money the tattoo shop would need to charge to produce another tattoo (eg the 81st tattoo) and be better off? Explain or show how you arrived at your answer.
If you are unfamiliar with the tattoo industry, please read the article, "Applied Art" by Rasha Mourtada from the 4 March 2010 issue of The Globe and Mail.