Question
In this assignment, you have to set up a three-part report explaining economic reality in specific situations based on the concepts of opportunity cost, demand
In this assignment, you have to set up a three-part report explaining economic reality in specific situations based on the concepts of opportunity cost, demand and supply, and the production possibilities model. Specifically, you are to play the role of the economic adviser in relation to a number of economic decisions presented in the scenario below. Go ahead and read the scenario. Good luck!
Scenario
Your uncle Jean Claude graduated from high school and went immediately to work at the local supermarket. His hard work attracted the attention of the store manager, who assigned to him greater responsibilities year after year until, after 15 years, he was promoted to assistant manager. Thanks to the knowledge and skills you have gained in your economics course, you will advise your uncle Jean Claude on a number of economic decisions he has to make as part of his job at the supermarket. Here is the information Jean Claude gives you, promising good money if you fulfill your task successfully.
Question 1: Purchase the business or take a management position
The owner of the supermarket decided that it was time for him to retire, so he put the supermarket up for sale. Jean Claude thought this was a great opportunity for him to own his own businessa dream he had entertained for the previous five years. With the help of funds from his relatives and a loan from a bank, and after turning down an offer of $65,000 a year to manage Buy-Rite Supermarket, a competing grocery store, Jean Claude bought the local supermarket and is now the proud owner of Supermarch Jean Claude. Now, at the end of the first year of operations, Jean Claude wants to know from an economic standpoint whether he would have been better off accepting the offer to manage Buy-Rite Supermarket, the competing grocery store.
Jean Claude does not pay himself a salary. The relevant income statement is presented below. Income Statement for Supermarch Jean Claude Sales $1,300,000 Direct cost of goods sold 800,000 Gross margin 500,000 Operating expense: Advertising and promotion 5,000 Payroll expense 160,000 Interest and taxes 100,000 Permits and licences 500 Miscellaneous 10,000 Total operating expenses 275,500 Net profit 224,500 Jean Claude looked at the bottom line and smiled because he thought he had earned so much money.
Instructions Using the appropriate economic concepts and principles, analyze Jean Claude's earnings from an economic perspective and give a hundred to two hundred paragraph statement for Jean Claude to show him whether he is right in thinking that he made the right decision by turning down the management position.
Question 2: Market for macaroni and cheese
Supermarch Jean Claude has received a shipment of 3,000 boxes of macaroni and cheese. He intends to price them at $4.00 per box. A reputable economist has determined that the demand for macaroni and cheese at Supermarch is as follows: Price per Box ($) Quantity of Boxes Demanded 4.50 1,500 4.00 2,000 3.50 2,500 3.00 3,000 2.50 3,500 2.00 4,000 Impressed by your work at analyzing his earnings, Jean Claude wants you to analyze the market for his macaroni and cheese. Specifically, he wants to know: Whether his intended price of $4.00 per box will enable him to sell his entire stock, leaving customers not wanting to buy more or less. What price change, if any, he will have to make to enable him to accomplish his objective. What impact a change in the price of a similar box of macaroni and cheese at Buy-Rite will have on the demand for his product.
Instructions You are required to analyze the market for macaroni and cheese at Supermarch and provide the information requested by Jean Claude in a hundred to 2 hundred word report.
Question 3: Production possibilities for NABs
Supermarch Jean Claude has decided to manufacture its own brand of non-alcoholic beverages, called NAB, and chocolate bars, called S-JC. A certain amount of money has been allocated to the production of these two products. Jean Claude believes in the old saying that a picture is worth a thousand words, and once again, he has called on you. This time, he wants to see diagrams that illustrate the effects of each of the following events on the production possibilities for NABs and S-JCs so he can visualize the situation. A new and more efficient method of producing non-alcoholic beverages is discovered. The demand for both non-alcoholic beverages and chocolate bars increases. More workers are hired to produce S-JCs. Resources are transferred from S-JC production to NAB production. All workers are trained so that the quality of their labour services improves.
Instructions Produce the series of graphs with accompanying texts so that Uncle Jean Claude will have the visual aids that he requires. (Assume all else remains equal.)
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