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Question 1

Demonstrate your understanding of The Fundamentals of Managerial Economics by answering the following questions:

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Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000. Jamie expects a profit margin of 20 percent. This margin is 5 percent larger than that of her largest competitor, Apps, Inc. 

●  If Jamie decides to embark on her new venture, what will her accounting costs be during the first year of operation?

○  Her company’s implicit costs? 

○  Her company’s opportunity costs? 

●  Suppose that Jamie’s estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn:

○  Positive accounting profits

○  Positive economic profits

Question 2

Please Analyze and explain the theory of Demand and Supply and create the graph for demonstrating the following scenario and answer the questions:  

●  G.R. Dry Foods Distributors specializes in the wholesale distribution of dry goods, such as rice and dry beans. The firm’s manager is concerned about an article he read in this morning’s Wall Street Journal indicating that the incomes of individuals in the lowest income bracket are expected to increase by 10 percent over the next year. While the manager is pleased to see this group of individuals doing well, he is concerned about the impact this will have on G.R. Dry Foods. 

o  Please explain what will happen to the price of the products G.R. Dry Foods sells?

o  Why? 

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