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BUS 640 Week 1 DQ 1 Firm Objectives
BUS 640 Week 1 DQ 2 Decision Making Under Uncertainty
BUS 640 Week 1 Economics of Risk and Uncertainty Applied Problems
BUS 640 Week 2 DQ 1 Marginal Rate of Substitution
BUS 640 Week 2 DQ 2 Demand Elasticity
BUS 640 Week 2 Consumer Demand Analysis and Estimation Applied
Problems
BUS 640 Week 3 DQ 1 Relevant Costs
BUS 640 Week 3 DQ 2 Contribution Analysis
BUS 640 Week 3 Production Cost Analysis and Estimation Applied
Problems
BUS 640 Week 4 DQ 1 Strategic Behavior Oligopolies
BUS 640 Week 4 DQ 2 Local Market Power
BUS 640 Week 4 Market Structures and Pricing Decisions Applied
Problems
BUS 640 Week 4 Journal Economics in News
BUS 640 Week 5 DQ 1 Good Will in Price Bidding
BUS 640 Week 5 DQ 2 New Product Introduction
BUS 640 Week 5 Price Quotes and Pricing Decisions Applied Problems
BUS 640 Week 6 DQ 1 Game Theory and Strategic Behavior
BUS 640 Week 6 DQ 2 Sustainable Competitive Advantage
BUS 640 Week 6 Final Paper Managerial Decision Making

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BUS 640 Week 1 DQ 1 Firm Objectives
Firm Objectives Why do some business firms pursue a triple-bottom-
line outcome while others focus only on profit maximization? Please,
use a real company example to illustrate your points
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BUS 640 Week 1 DQ 2 Decision Making Under
Uncertainty

Decision Making Under Uncertainty To save on gasoline expenses,
Edith and Mathew agreed to carpool together for traveling to and from
work. Edith preferred to travel on I-20 highway as it was usually the
fastest, taking 25 minutes in the absence of traffic delays. Mathew
pointed out that traffic jams on the highway can lead to long delays
making the trip 45 minutes. He preferred to travel along Shea Boulevard,
which was longer (35 minutes), but rarely had traffic jams. Edith agreed
that in case of traffic jams, Shea Boulevard was a reasonable alternative.
Neither of them knows the state of the highway ahead of time.
After driving to work on the I-20 highway for 1 month (20 workdays),
they found the highway to be jammed 3 times. Assuming that this month
is a good representation of all months ahead, should Edith and Mathew
continue to use the highway for traveling to work?
How would you conclusion change for the winter months, if bad weather
makes it likely for traffic jams on the highway to increase to 6 days per
month?
How would your conclusion change if Mathew purchased a new smart-
phone app that could show the status of the highway traffic prior to their
drive each morning, thus reducing the probability of them getting into a
jam down to only 1day per month (where on this day, the app showed no
traffic jam, but a jam developed in the meantime as they were driving
along the highway).
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BUS 640 Week 1 Economics of Risk and
Uncertainty Applied Problems

We have a New Latest Set of Week 1 Assignment Applied Problems,
which could be found on this link
Economics of Risk and Uncertainty Applied Problems. Please, complete
the following 3 applied problems in a Word or Excel document. Show
all your calculations and explain your results. Submit your assignment in
the drop box by using the Assignment Submission button.
1. A generous university benefactor has agreed to donate a large amount
of money for student scholarships. The money can be provided in one
lump-sum of $10mln, or in parts, where $5.5mln can be provided in year
1, and another $5.5mln can be provided in year 2. Assuming the
opportunity interest rate is 6%, what is the present value of the second
alternative? Which of the two alternatives should be chosen and why?
How would your decision change if the opportunity interest rate was
12%? Please, show all your calculations.
2. Volkswagen is considering opening an Assembly Plant in
Chattanooga, Tennessee, for the production of its 2012 Passat, tailored
for the US market. The CEO of the company is considering two

potential options for the size of the plant: one is a large size with a
projected annual production of 150,000 cars, and the other one is a
smaller size plant, which is cheaper to build, but can only produce up to
80,000 cars per year. Depending on the expected level of demand for
these cars in the US, Volkswagen has to decide which option is more
profitable. The discount rate is 6% and for simplicity purposes, the CEO
is only evaluating a two-year horizon. The initial factory setup cost, the
expected demand scenarios, profit, and probabilities are shows in the
below table. Calculate the Net Present Value in each of the two options.
Which option should the CEO choose and why? Please, show all your
calculations.
3. An angel investor is considering investing in one of two start-up
businesses and is evaluating the expected returns along with the risk of
each option in order to choose the better alternative.
Business 1 is an innovative protein energy drink, which has ENPV of
$100,000 with a standard deviation of $40,000.
Business 2 is a unique chicken wings dipping sauce with an ENPV of
$60,000 and a standard deviation of $25,000.
a) Apply the coefficient-of-variation decision criterion to these
alternatives to find out which is preferred by the angel investor,
assuming that he/she is risk-averse.
b) Apply the maximin criterion, assuming that the worst outcome in
Business 1 is to lose $5,000, whereas the worst outcome in Business 2 is
to make only $5,000 in profit.
c) If you were the angel investor, what is your certainty equivalent for
these two projects? Are you risk-averse, risk-neutral, or risk-lover?

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BUS 640 Week 1 Economics of Risk and
Uncertainty Applied Problems
We have another Set (old one) of Week 1 Assignment (But with
different description, values), it can be found on this link
BUS640 week 1 Assignment
Problem 1:
A generous university benefactor has agreed to donate a large amount of
money for student scholarships. The money can be provided in one lump
sum of $12 million in Year 0 (the current year), or in parts, in which $7
million can be provided at the end of Year 1, and another $7 million can
be provided at the end of Year 2.
Describe your answer for each item below in complete sentences,
whenever it is necessary. Show all of your calculations and processes for
the following points:

Assuming the opportunity interest rate is 8%, what is the present value
of the second alternative mentioned above? Which of the two
alternatives should be chosen and why?
How would your decision change if the opportunity interest rate is 12%?
Provide a description of a scenario where this kind of decision between
two types of payment streams applies in the “real-world” business
setting.
Problem 2:
The San Diego LLC is considering a three-year project, Project A,
involving an initial investment of $80 million and the following cash
inflows and probabilities:
Year 0
Initial Investment $80 million discount rate 8%
Year 1 Probability .2 Cash flow $50 million, Probability .3 Cash flow
$40 million, Probability .4 Cash flow $30 million, Probability .1 Cash
flow $20 million
flow $30 million
flow $40 million
Describe your answer for each question in complete sentences,
whenever it is necessary. Show all of your calculations and processes for
the following points:
Describe and calculate Project A’s expected net present value (ENPV)
and standard deviation (SD), assuming the discount rate (or risk-free

interest rate) to be 8%. What is the decision rule in terms of ENPV?
What will be San Diego LLC’s decision regarding this project? Describe
your answer.
The company is also considering another three-year project, Project B,
which has an ENPV of $32 million and standard deviation of $10.5
million. Project A and B are mutually exclusive. Which of the two
projects would you prefer if you do not consider the risk factor? Explain.
Describe the coefficient of variation (CV) and the standard deviation
(SD) in connection with risk attitudes and decision making. If you now
also consider your risk-aversion attitude, as the CEO of the San Diego
LLC will you make a different decision between Project A and Project
B? Why or why not?
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BUS 640 Week 2 Consumer Demand Analysis and
Estimation Applied Problems

Consumer Demand Analysis and Estimation Applied Problems. Please,
complete the following 3 applied problems in a Word or Excel
document. Show all your calculations and explain your results. Submit
your assignment in the drop box by using the Assignment Submission
button.
1. Roshima is researching universities where she could study for her
MBA degree. She is considering 3 major attributes that she considers
important in her choice: ranking, price, and location. The value she
places on each attribute, however, differs according to whether she
remains full-time employed during her studies or quits her job and
focuses on her degree. If she continues to work full time and takes all
her courses online, then ranking is the most important attribute, twice as
important as price and three times as important as location. If she quits
her job and attends school full time, then location becomes three times
as important as ranking and twice as important as price. She is
considering two universities, respectively, the MBA program at Arizona
State University (ASU) and the MBA program at University of Phoenix
(UOP), both of which are priced at approximately $25,000. She has
rated each attribute on a scale of 1 to 100 for each of the two schools.
a. Which of the two options should Roshima pursue of she wants to keep
her full-time job? (Calculate the total expected utility from each school
option and compare. Graph is not required)
b. Which of the two options should she pick if she plans to quit her job
and dedicate to her studies?
c. Which option should she pursue if the probability of being laid off and
unable to find a new job is estimated as 0.6? Show your calculations and
explain your reasoning.
2. The demand function for Einstein Bagels has been estimated as
follows:

– 40.73Px + 84.17Py + 0.55Ax
whereQx represents thousands of bagels; Px is the price per bagel; Py is
the average price per bagel of other brands of bagels; and Ax represents
thousands of dollars spent advertising Einstein Bagels. The current
values of the independent variables are , , and
a. Calculate the price elasticity of demand for Einstein’s Bagels and
explain what it means.
b. Derive an expression for the (inverse) demand curve for Einsteins’s
Bagels.
c. If the cost of producing Einstein’s Bagels is constant at $0.10 per
bagel, should they reduce price and thereafter, sell more bagels (assume
profit maximization is the company’s goal)?
d. Should Einstein Bagels spend more on advertising?
3. The consulting firm that you work for has been hired by the US
Government to provide an independent analysis of the demand-side
effects of a contemplated increase in the tax on gasoline. They provide
you with a data set relating to the period 1962-1987, which they say
contains valuable historic lessons relating to the impact of volatile pump
prices due to the supply restrictions imposed by the Organization of
Petroleum Exporting Countries (OPEC), and the Corporate Average
Fuel Economy (CAFE) regulations that required car manufacturers to
increase the fuel efficiency of the cars they sold, while at the same time
Real Disposable Income (RDI) per capita was rising, the number of
passenger cars (NPC) almost doubled, and inflation was pushing up the
Consumer Price Index (CPI).

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BUS 640 Week 2 Consumer Demand Analysis and
Week 2 Assignment
Consumer Demand Analysis and Estimation Applied Problems
Please complete the following two applied problems:
Problem 1:
Patricia is researching venues for a restaurant business. She is evaluating
three major attributes that she considers important in her choice: taste,
location, and price. The value she places on each attribute, however,

differs according to what type of restaurant she is going to start. If she
opens a restaurant in a suburban area of Los Angeles, then taste is the
most important attribute, three times as important as location, and two
times as important as price. If she opens a restaurant in the Los Angeles
metropolitan area, then location becomes three times as important as
taste and two times as important as price. She is considering two venues,
respectively, a steak restaurant and a pizza restaurant, both of which are
priced the same. She has rated each attribute on a scale of 1 to 100 for
each of the two different types of restaurants.
Attribute
Steak Restaurant
Pizza Restaurant
Taste
80
70
Location
55
80

Price
65
50
Show all of your calculations and processes. Describe your answer for
each question in complete sentences.
Which of the two options should Patricia pursue if she wants to open a
restaurant in a suburban area of Los Angeles? Calculate the total
expected utility from each restaurant option and compare. Graph is not
required. Describe your answer, and show your calculations.
Which of the two options should she pick if she plans to open a
restaurant in the Los Angeles metropolitan area? Describe your answer,
and show your calculations.
Which option should she pursue if the probability of finding a
restaurant venue in a suburban area can be reliably estimated as 0.7 and
in a metropolitan area as 0.3? Describe your reasoning and show your
calculations.
Provide a description of a scenario in which this kind of decision
between two choices, based on weighing their underlying attributes,
applies in the “real-world” business setting. Furthermore, what are the
benefits and drawbacks, if any, to this method of decision making?
Problem 2:

The demand function for Newton’s Donuts has been estimated as
follows:
Qx = -14 – 54Px + 45Py + 0.62Ax
where Qx represents thousands of donuts; Px is the price per donut; Py is
the average price per donut of other brands of donuts; and Ax represents
thousands of dollars spent on advertising Newton’s Donuts. The current
values of the independent variables are Ax=120, Px=0.95, and Py=0.64.
each question in complete sentences, whenever it is necessary.
Calculate the price elasticity of demand for Newton’s Donuts and
describe what it means. Describe your answer and show your
calculations.
Derive an expression for the inverse demand curve for Newton’s
Donuts. Describe your answer and show your calculations.
If the cost of producing Newton’s Donuts is constant at $0.15 per
donut, should they reduce the price and thereafter, sell more donuts
(assuming profit maximization is the company’s goal)?
Should Newton’s Donuts spend more on advertising?
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BUS 640 Week 2 DQ 1 Marginal Rate of
Substitution

Marginal Rate of Substitution What is the marginal rate of substitution
(MRS) and why does it diminish as the consumer substitutes one product
for another? Use examples to illustrate
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BUS 640 Week 2 DQ 2 Demand Elasticity
Demand Elasticity. Please, read the article Hainer, R. (2010), provided
in the required readings section for this week. The tobacco industry is a
prime example to consider when talking about price elasticity of
demand. While nicotine use can be addictive for many users, it is not
addictive for the so-called "social smokers".
What can we say about the price elasticity of demand for nicotine
products (such as cigarettes, pipes, tobacco) in the group of nicotine

addicted users, versus the group of "social smokers"? Can we say whose
demand is likely to be more elastic? Why?
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BUS 640 Week 3 DQ 1 Relevant Costs
Relevant Costs Two partners own together a small landscaping business
in North Carolina, called Summer Lawn Care. They have been
specializing in summer grass seeding, installation, and maintenance.
Recently, the partners acquired special technology and know-how for
winter grass installations and maintenance. They also added a tree
cutting service as recent storms in the area had caused demand for this
service to soar. One of the partners insists that the name of the business
should change to Lawn and Tree Care, so that it better reflects the range
of services and, thus, generates more customer interest, and thus
contracts. The second partner wants to keep the old name and argues,
“We have already paid for business cards, vehicle paint, signage, and
ads in Yellow Pages”. Evaluate the arguments of the two partners.
Explain and illustrate their points by identifying the relevant and
irrelevant costs for this decision.

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BUS 640 Week 3 DQ 2 Contribution Analysis
Contribution Analysis Explain what is meant by “contribution
analysis”. Carefully define the term and provide examples to illustrate it.
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BUS 640 Week 3 Production Cost Analysis and

http://www.snaptutorial.com/BUS-640/BUS-640-Week-3-Production-
Cost-Analysis-and-Estimation-Applied-Problems-latest
Production Cost Analysis and Estimation Applied Problems. Please,
complete the following 3 applied problems in a Word or Excel
document. Show all your calculations and explain your results. Submit
your assignment in the drop box by using the Assignment Submission
button.
1. Jennifer Trucking Company operates a large rig transportation
business in Texas that transports locally grown vegetables to San Diego,
California. The company owns 5 large rigs and hires local drivers paid
fixed salaries monthly, regardless of the number of trips or tons of cargo
that each driver transports each month.
2. The Palms Dry Cleaning Shop in Fort Lauderdale, Florida, faces a
highly seasonal demand for its services, as the snow-birds retirees flock
to Florida in mid-fall to enjoy the mild winter weather and then return to
their main homes in mid-spring. Given this seasonality, Palms tries to
keep the overhead costs as low as possible and therefore, often uses
seasonal contracted labor to man its operations. The following table
shows the labor costs in each month of operation over the past 12
months as well as the total number of garments that were dry-cleaned in
each month. Palms pays fixed wages per hour to each employee, and we
can assume that the costs of other variable inputs (such as chemicals,
electricity, etc) have remained constant.
3. Over the past 12 months the Four Winds Novelty Company firm has
recorded its internet sales (equals monthly output levels) and its monthly
total variable costs (TVC) for a particular novelty item as shown in the

following table. Sales have grown over this period with relatively few
shocks due to uncontrollable weather, political and sporting events. This
online retailer carries no inventories; when it receives a pre-paid on-line
order from a customer, it simply buys the product from a supplier and
ships it out to the customer.
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BUS 640 Week 3 Production Cost Analysis and
Production Cost Analysis and Estimation Applied Problems

Problem 1:
William is the owner of a small pizza shop and is thinking of increasing
products and lowering costs. William’s pizza shop owns four ovens and
the cost of the four ovens is $1,000. Each worker is paid $500 per week.
Workers employed
Qty of pizzas produced per week
0
0
1
75
2
180
3
360
4

600
5
900
6
1140
7
1260
8
1360
each question in complete sentences, whenever it is necessary.
Which inputs are fixed and which are variable in the production
function of William’s pizza shop? Over what ranges do there appear to
be increasing, constant, and/or diminishing returns to the number of
workers employed?
What number of workers appears to be most efficient in terms of
pizza product per worker?

What number of workers appears to minimize the marginal cost of
pizza production assuming that each pizza worker is paid $500 per
week?
Why would marginal productivity decline when you hire more
workers in the short run after a certain level?
How would expanding the business affect the economies of scale?
When would you have constant returns to scale or diseconomies of
scale? Describe your answer.
Problem 2:
The Paradise Shoes Company has estimated its weekly TVC function
from data collected over the past several months, as TVC = 3450 + 20Q
+ 0.008Q2 where TVC represents the total variable cost and Q
represents pairs of shoes produced per week. And its demand equation is
Q = 4100 – 25P. The company is currently producing 1,000 pairs of
shoes weekly and is considering expanding its output to 1,200 pairs of
shoes weekly. To do this, it will have to lease another shoe-making
machine ($2,000 per week fixed payment until the lease period ends).
each item below in complete sentences, whenever it is necessary.
Describe and derive an expression for the marginal cost (MC) curve.
Describe and estimate the incremental costs of the extra 200 pairs per
week (from 1,000 pairs to 1,200 pairs of shoes).
What are the profit-maximizing price and output levels for Paradise
Shoes? Describe and calculate the profit-maximizing price and output.
Discuss whether or not Paradise Shoes should expand its output
further beyond 1,200 pairs per week. State all assumptions and
qualifications that underlie your recommendation.

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BUS 640 Week 4 DQ 1 Strategic Behavior
Oligopolies
Strategic Behavior Oligopolies An interesting example of strategic
behavior comes from a 1997 article about Microsoft’s investment in
Apple (New Straits Times, 1997). The article is included in the Required
Readings list. Facing tough anti-trust scrutiny from government
agencies, Microsoft provided financial support to Apple in order to
ensure Apple’s survival and, therefore, to ensure that competitiveness in
the industry remains. Moreover, the partnership with Apple provided an
additional market for Microsoft’s products – the MS Office and the IE
products were to be bundled with the MAC OS as one of the conditions
for this financing. Discuss this case in the context of market structure
and strategic behavior. What market structure do these firms operate in?
Why did Microsoft need to preserve competitiveness in the industry?
What was Microsoft afraid of in the event that Apple did not survive?

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BUS 640 Week 4 DQ 2 Local Market Power
Local Market Power Bulls Eye department store specializes in the sales
of discounted clothing, shoes, household items, etc. similar to the
offerings at a regular Wal-Mart or Target. Bulls Eye is the only
department store in Show Low and the nearest other discount retailer is
Target, located 49 miles away in Eagar. Bulls Eye, therefore, has some
market power in its local area. Despite having some market power, Bulls
Eye is currently suffering losses. An analyst at Bulls Eye is
recommending to the manager to raise prices, so that profitability can be
improved. The manager is unsure of this strategy as recent data points to
increasing numbers of individuals shopping more and more. What are
the pros and cons of raising the prices at Bulls Eye and would that
strategy be profitable?
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BUS 640 Week 4 Market Structures and Pricing
Decisions Applied Problems

Market Structures and Pricing Decisions Applied Problems A small
business which produces plastic vacuum-suction covers for round
household dishes has a monopoly that is protected by a utility patent.
The market demand curve for this product is estimated to be: – 25P
where Q is the number of plate covers per year and P is in dollars. Cost
estimation processes have determined that the firm’s cost function is
represented by + 2500Q -0.25*Q2.
2. Greener Grass Company (GGC) competes with its main rival, Better
Lawns and Gardens (BLG), in the supply and installation of in-ground
lawn watering systems in the wealthy western suburbs of a major east-
coast city. Last year, GGC’s price for the typical lawn system was
$1,995 compared with BLG’s price of $2,100. GGC installed 9,130
systems, or about 55% of total sales and BLG installed the rest. (No
doubt many additional systems were installed by do-it-yourself
homeowners since the parts are readily available at hardware stores.)
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BUS 640 Week 4 Market Structures and Pricing

Market Structures and Pricing Decisions Applied Problems
Problem 1:
Robert’s New Way Vacuum Cleaner Company is a newly started small
business that
produces vacuum cleaners and belongs to a monopolistically
competitive market. Its
demand curve for the product is expressed as Q = 5000 – 25P where Q is
the number of
vacuum cleaners per year and P is in dollars. Cost estimation processes
have determined
that the firm’s cost function is represented by TC = 1500 + 20Q +
0.02Q2.
each question in
complete sentences, whenever it is necessary.
a. What are the profit-maximizing price and output levels? Explain them
and calculate
algebraically for equilibrium P (price) and Q (output). Then, plot the MC
(marginal
cost), D (demand), and MR (marginal revenue) curves graphically and
illustrate the
equilibrium point.
b. How much economic profit do you expect that Robert’s company will
make in the
first year?
c. Do you expect this economic profit level to continue in subsequent
years? Why or
why not?

Problem 2:
Greener Grass Company (GGC) competes with its main rival, Better
Lawns and Gardens
(BLG), in the supply and installation of in-ground lawn watering
systems in the wealthy
western suburbs of a major east-coast city. Last year, GGC’s price for
the typical lawn
system was $1,900 compared with BLG’s price of $2,100. GGC
installed 9,960 systems, or
about 60% of total sales and BLG installed the rest. (No doubt many
additional systems
were installed by do-it-yourself homeowners because the parts are
readily available at
hardware stores.)
GGC has substantial excess capacity–it could easily install 25,000
systems annually, as it
has all the necessary equipment and can easily hire and train installers.
Accordingly, GGC
is considering expansion into the eastern suburbs, where the
homeowners are less wealthy.
In past years, both GGC and BLG have installed several hundred
systems in the eastern
suburbs but generally their sales efforts are met with the response that
the systems are too
expensive. GGC has hired you to recommend a pricing strategy for both
the western and
eastern suburb markets for this coming season. You have estimated two
distinct demand
functions, as follows:
Qw =2100 – 6.25Pgw + 3Pbw + 2100Ag - 1500Ab + 0.2Yw
for the western market and
Qe = 36620 - 25Pge + 7Pbe + 1180Ag - 950Ab + 0.085Ye

for the eastern market, where Q refers to the number of units sold; P
refers to price level; A
refers to advertising budgets of the firms (in millions); Y refers to
average disposable
income levels of the potential customers; the subscripts w and e refer to
the western and
eastern markets, respectively; and the subscripts g and b refer to GGC
and BLG,
respectively. GGC expects to spend $1.5 million (use Ag = 1.5) on
advertising this coming
year and expects BLG to spend $1.2 million (use Ab = 1.2) on
advertising. The average
household disposable income is $60,000 in the western suburbs and
$30,000 in the eastern
suburbs. GGC does not expect BLG to change its price from last year
because it has
already distributed its glossy brochures (with the $2,100 price stated) in
both suburbs, and
its TV commercial has already been produced. GGC’s cost structure has
been estimated as
TVC = 750Q + 0.005Q2, where Q represents single lawn watering
systems.
each item below in
complete sentences, whenever it is necessary.
a. Derive the demand curves for GGC’s product in each market.
b. Derive GGC’s marginal revenue (MR) and marginal cost (MC) curves
in each
market. Show graphically GGC’s demand, MR, and MC curves for each
market.
c. Derive algebraically the quantities that should be produced and sold,
and the prices
that should be charged, in each market.
d. Calculate the price elasticities of demand in each market and discuss
these in

relation to the prices to be charged in each market.
e. Add a short note to GGC management outlining any reservations and
qualifications
you may have concerning your price recommendations.
Reference:
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BUS 640 Week 5 DQ 1 Good Will in Price
Bidding
Good Will in Price Bidding. Sometimes, a bidder on a work contract
may bid lower than what would maximize his/her profit from the
contract and the reason for that is to create goodwill (to increase
expected future business from the buyer). How would you value the
goodwill that is obtained in this way?
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BUS 640 Week 5 DQ 2 New Product Introduction
New Product Introduction Bayer Schering Pharma AG, Germany
owns the Alka-Seltzer, which was launched in 1931 and was meant for
relief of minor aches, pains, inflammation, fever, headache, heartburn,
sour stomach, indigestion, and hangovers. The Alka-Seltzer Plus was a
spin-off of the original medicine, meant to relieve colds and flu.
The company has recently introduced a new and improved Alka-Seltzer
Plus, as described in the TV ad: “The Cold Truth”, (please, watch the ad
listed in the Required Readings)
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BUS 640 Week 5 Price Quotes and Pricing

Week 5 Assignment
Price Quotes and Pricing Decisions Applied Problems
Problem 1:
Jessica Alba, a famous actress, starts the baby and family products
business, The Honest Company, with Christopher Gavigan. Alba and
Gavigan set up their site so families can choose what kinds of non-toxic,
all-natural products they'd like to use and get them in a bundle. Families
can choose all kinds of products from food to hygiene necessities and
cleaning supplies. Suppose they are thinking of expanding their business
into five domestic markets: Phoenix, Dallas, Chicago, New York, and
Atlanta. Assume their primary goal of business is to maximize economic
profits, although they want to do business honestly.
Show all your calculations and process. Describe your answer for each
question in three- to five-complete sentences.
You are a business adviser for Alba and Gavigan. Describe a
skimming price and a penetration price, and advise them whether they
should charge a skimming price or a penetration price, with supportive
reasoning for and against each pricing alternative.
Are they likely to make economic profits initially? Can they continue
to make economic profits in the long term? Why or why not? Discuss.

What advice would you give to Alba and Gavigan to help them make
more profit in the long term?
Problem 2:
You operate your own small building company and have decided to bid
on a government contract to build a pedestrian walkway in a national
park during the coming winter. The walkway is to be of standard
government design and should involve no unexpected costs. Your
present capacity utilization rate is moderate and allows sufficient scope
to understand this contract, if you win it. You calculate your incremental
costs to be $268,000 and your fully allocated costs to be $440,000. Your
usual practice is to add between 60% and 80% to your incremental costs,
depending on capacity utilization rate and other factors. You expect
three other firms to also bid on this contract, and you have assembled the
following competitor intelligence about those companies.
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BUS 640 Week 5 Price Quotes and Pricing

http://www.snaptutorial.com/BUS-640/BUS-640-Week-5-Price-Quotes-
and-Pricing-Decisions-Applied-Problems-latest
BUS 640 Week 5 Price Quotes and Pricing Decisions Applied
Problems
Price Quotes and Pricing Decisions Applied Problems. Please, complete
the following 3 applied problems in a Word or Excel document. Show
all your calculations and explain your results. Submit your assignment in
the drop box by using the Assignment Submission button.
Maxim Motronics A.G. have been marketing a new product in Europe
that has achieved notable market success and it now plans to introduce
this product into the United States market. The product is an electronic
device that is mounted in the rear window of passenger cars and allows
the driver of one vehicle to have a spoken message converted to text and
scrolled across the display panel to be read by occupants of a following
vehicle. This new product can utilize the hands-free telephone
microphone already installed in many new vehicles, or provides this as
free accessory. Maxim expects that demand will be slow at first but will
pick up quickly as automobile accessory stores begin to stock the
product and as word-of-mouth promotion spreads awareness. Maxim
also plans to produce a humorous video for posting to YouTube and to
utilize social-media marketing to spread awareness and enthusiasm for
the new product. Market demand estimates provided by Maxim are that
the firm expects to sell about 125,000 units into the U.S. market within
24 months, and that sales per month will start slowly and increase
monthly in the expected diffusion pattern until they stabilize at about
10,000 per month after month 24. The diffusion curve parameters that fit
these assumptions are shown in the equation + 46.11T2 – 1.352T3,
where Q is sales per month and T is the number of months after the

launch into the US market. Maxim’s average variable cost (AVC) is
constant at $62 per unit and he expects to set the profit-maximizing price
by applying a 167% mark-up to arrive at his regular price of $165, since
he estimates the demand curve to be – 0.02Q.
a. What introductory price do you recommend Maxim sets for the launch
of the product into the US market, and why? (State any assumptions you
need to make).
b. How might he further adjust the price before raising it to the regular
level he envisions? (Again, state any assumptions you need to make.)
c. What is your advice for Maxim concerning the confirmation of his
prior projections of demand and the shape of the diffusion curve, and the
profit-maximizing price, after this new product gains some months of
experience in the U.S. market?
2. Your company, Bright Paints, is one of a dozen companies
manufacturing a special reflective paint used for traffic signs. The State
Department of Transportation has called for tenders to supply 10,000
gallons of blue reflective paint to be delivered within two months. You
can foresee fitting in a production run of the blue paint and have decided
to bid on the job. You calculate your incremental costs for this job to be
$76,200. This particular contract is standard, similar in all in respects to
hundreds of contracts you have bid on over the past few years. Your
pricing policy has been to apply a mark-up to incremental costs to arrive
at the bid price. Your mark-up has been higher when you had plenty of
orders and lower when you had few or no orders to fulfill. You have
assembled data relating the mark-up rate used and the percentage of
contracts won at each mark-up rate, as follows.
a. Why would your company have bid with a zero mark-up on some past
tenders? Why didn’t it win all of those contracts?
b. What is the bid price that maximizes the expected contribution of the
contract?
c. Why, or why not, is the fixed-price mode of bidding likely to be the
best one to use for this contract?
3. In calculating the incremental cost of a particular project, how would
you treat the possible future costs of a lawsuit that may occur as a result

of this project, where the cost of the lawsuit might range from $10,000
to $500,000 with an associated probability distribution?
***************************************************
BUS 640 Week 6 DQ 1 Game Theory and
Strategic Behavior
Game Theory and Strategic Behavior Suppose that GE is trying to
prevent Maytag from entering the market for high efficiency clothes
dryers. Even though high efficiency dryers are more costly to produce,
they are also more profitable as they command sufficiently higher prices
from consumers. The following payoffs table shows the annual profits
for GE and Maytag for the advertising spending and entry decisions that
they are facing.
Based on this information, can GE successfully prevent Maytag from
entering this market by increasing its advertising levels? What is the
equilibrium outcome in this game?

***************************************************
BUS 640 Week 6 DQ 2 Sustainable Competitive
Advantage
Sustainable Competitive Advantage Describe the circumstances under
which a firm chooses a low-cost strategy to attain sustainable
competitive advantage. What about the situations when a differentiation
strategy is chosen? Provide specific real world examples.
***************************************************
BUS 640 Week 6 Final Paper (Wal-mart)

We have another set of Final Paper based on Apple company, it could be
found on this link
BUS640 Week 6 Paper(Wal-Mart)
Managerial Decision Making Research and Analysis
Research a specific company of your choice and identify some of the
managerial decisions that were made over time and in response to
changes in its market or competitive environment. Use Ashford
University Online library and web-based resources for your research. At
least 3 external resources must be used. Address all of the following
areas:
Focus of the Final Paper
Describe the company and provide a brief history of its operations. Find
or use graphs to illustrate its financial performance over the years.
Identify any sources of risk or uncertainty in its operations. Do the
financial reports indicate risky or uncertain activities or changes to the
economic environment that ultimately appear to have affected the
company’s financial outcomes? Be specific.
Are there any government regulations that have affected this company’s
operations domestically or abroad? Explain.
Describe the inputs that are used in this company’s production function
and identify any challenges to securing these inputs.
Determine if the company has introduced new products in existing
markets or created new markets over time. What is the impact on its
finances?
Determine if the price of its products increased or declined over time
and analyze the reasons for price fluctuations. Study the demand
elasticity for its products and discuss the availability of close substitutes
for its products. How does that affect pricing decisions?

Analyze the company’s profitability. Identify the economy or industry
influences on its costs, operations, and profitability.
Describe the competitive environment in which the firm operates, the
distribution of market power, and the strategic behavior of the firm and
its competitors. Apply your knowledge of the theory of this company’s
market structure. How does the company make pricing and production
decisions? Is your observation supported by the theoretical models?
Refer to the financial reports for illustration.
Identify any non-price competitive strategies that the company might be
engaging in? Provide specific examples.
Evaluate if the company made any mistakes in its decisions over time,
and recommend any changes or improvements for the future operations.
Refer to the financial reports when making specific observations or
recommendations.
Use economic language and demonstrate your understanding of the
concepts and theories of this course.
Writing the Final Paper
The Final Paper:
1. Must be 8 to 10 double-spaced pages in length, and formatted
according to APA style as outlined in the Ashford Writing Center.
2. Must include a title page with the following:
a. Title of paper
b. Student’s name
c. Course name and number
d. Instructor’s name
e. Date submitted
3. Must begin with an introductory paragraph that has a succinct thesis
statement.

4. Must address the topic of the paper with critical thought.
5. Must end with a conclusion that reaffirms your thesis.
6. Must use at least 3 scholarly sources.
7. Must document all sources in APA style, as outlined in the Ashford
Writing Center.
8. Must include a separate reference page, formatted according to APA
style as outlined in the Ashford Writing Center.
***************************************************
BUS 640 Week 6 Final Paper Managerial
Decision Making
We have another set of final paper based on walmart which could be
found on this link
http://www.snaptutorial.com/BUS-640/BUS-640-Week-6-Final-Paper-
(Wal-mart)

Focus of the Final Paper
Research a specific company of your choice and identify some of the
managerial decisions that were made over time and in response to
changes in its market or competitive environment. Use the Ashford
University Online Library and web-based sources for your research. At
least three external scholarly sources must be used. Address all of the
following areas:
Describe the company and provide a brief history of its operations. Find
or use graphs to illustrate its financial performance over the years.
Identify any sources of risk or uncertainty in its operations. Do the
financial reports indicate risky or uncertain activities or changes to the
economic environment that ultimately appear to have affected the
company’s financial outcomes? Be specific.
Are there any government regulations that have affected this company’s
operations domestically or abroad? Explain.
***************************************************

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