Suppose that you have wheat in storage and that the price of wheat is currently $7.00 per bushel. You can sell your wheat immediately but you also have an opportunity to sell in six months. At that time, you believe the price of wheat will be $8.00 per bushel. Your cost of storage is $0.75 per bushel for six months. One dollar in six months is worth one dollar today (no time preference). What strategy is profit maximizing?
A. Hold onto your wheat and sell in six months.
B. Sell your wheat today.
C. Minimize your losses by exiting the wheat market.
D. Expand production to sell more wheat.
Ans: A. Hold onto your wheat and sell in six months.
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The figure above illustrates the marginal private cost and the marginal social cost to the city of Seattle for each rock concert that is offered. It also illustrates the marginal benefit. There is no external benefit
If the city of Seattle puts on 5 concerts per year, then the marginal benefit will A) exceed the marginal social cost. B) equal the marginal private cost. C) be less than the marginal social cost. D) equal the marginal social cost. E) None of the above answers is correct.
Tom & Jerry are running Hanna Barbera's lemonade stand as two profit centers. Tom makes the lemonade while Jerry sells it. Jerry argues that Tom is transferring the lemonade to him priced too high, which forces him to charge the customers a high price, losing sales. What could be a profitable solution to this transfer-pricing problem?
a. Move the decision making to Hanna Barbera b. Turn Tom's division into a cost center c. Base Tom's reward on the company profits d. Base Jerry's reward on the company profits