Answered: Suppose that Maria is starting a food…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that Maria is starting a food ordering and delivery company. Customers order meals online. Employees prepare the meals and deliver them to customers. Maintenance of the online platform for ordering meals costs the company $5/day. The company also rents spave where orders are prepared. Rent costs $50/day. To make the deliveries, the business also rents two delivery cars the cost $10/day. The costs of ingredients for preparing different numbers of meals are $50. Maria also has to hire between 0-10 workers to buy ingredients, prepare meals, and deliver the orders. She pays them $120/day. The first two columns of the table below shows how many meals different number of workers can prepare and deliver.

Suppose Maria charges $50/order and delivery. What is the max profit she could earn? How many meals does the business have to deliver to earn the highest possible profit?

What is the shut-down price of the business? What is the break-even price?

Suppose that the price of rent increases to $60/day. How many meals does the business have to deliver to earn the highest possible profit?

Price per meal
Workers Meals (Output
(Labor L)
Q)
0
1
2
3
4
L
6
7
8
9
10
0
30
42
52
60
67
73
79
85
90
95
$50
MPL
30
12
10
8
7
6
6
6
5
55
5
FC
$75
$75
$75
$75
$75
$75
$75
$75
$75
$75
$75
Cost of
ingredients
$10
$75
$100
$121
$138
$152
$165
$177
$189
$199
$210
VC
$10
$195
$340
$481
$618
$752
$885
$1,017
$1,149
$1,279
$1,410
TC
AFC
$85
$270 $
3.00
$415 $
$556 $
$693 $
$827 $
1.79
1.44
1.25
1.12
$960 $ 1.03
0.95
0.88
0.83
0.79
$1,092 $
$1,224 $
$1,354 $
$1,485 $
AVC
$6.50
$8.10
$9.25
$10.30
$11.22
$12.12
$12.87
$13.52
$14.21
$14.84
ATC
$9
$10
$11
$12
$12
$13
$14
$14
$15
$16
MC
$6
63
TR
$0
$85
$1,500
$1,230
$3
$2,100
$1,685
$3
$2,600 $2,044
$3
$3,000
$2,307
$2
$3,350
$2,523
$2
$3,650
$2,690
$2
$3,950 $2,858
$2
$4,250
$3,026
$3,146
$1 $4,500
$1 $4,750 $3,265
Profit
Profit per
meal
$41
$40
$39
$38
$38
$37
$36
$36
$35
$34

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