# BUSI 620 BUSI620 MODULE 1 CRITICAL THINKING 1 (LIBERTY UNIVERSITY)

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BUSI620 Module 1 Critical Thinking 1 (Liberty University)

Discussion Questions: 9.
Problems: 6, 9, and spreadsheet problem (p. 37).
Discussion Question 9: How is the concept of a normal return on investment related to the distinction between business and economic profit?

Problem 6: Determine which of the two investment projects of Problem 5 the manager should choose if the discount rate of the firm is 20 percent.

Problem 9: A woman managing a photocopying establishment for \$25,000 per year decides to open her own duplicating place. Her revenue during the first year of operations is \$120,000 and her expenses are as follows:

Salaries to hired help

45,000

Supplies

15,000

Rent

10,000

Utilities

1,000

Interest on bank loan

10,000

Calculate (a) Explicit Costs, (b) Implicit Costs, (c) Business Profit, (d) Economic Profit, and (e) Normal Return on Investment.

Spreadsheet Problem: Using the data below, where column A represents student numbers, column B the finishing time for a 1 mile race for students, and column C the age of the students.

a) Use the data analysis tools to plot a line graph of all the finishing times.

b) Calculate the mean, median, mode, sample variance, sample standard deviation, and coefficient of variation to statistically describe the data.

c) Use Excel to find the covariance between the two variables. What does the covariance indicate about the relationship between finishing time and age?

Froeb et al.’s Chapter 3:

a. Individual problems: 3-1 and 3-3.

Individual problem 3-1: You won a free ticket to see a Bruce Springsteen concert (assume the ticket has no resale value). U2 has a concert the same night, and this represents your next-best alternative activity. The tickets to the U2 concert costs \$80, and on any particular day, you would be willing to pay up to \$100 to see this band. Assume that they are no additional costs of seeing either show. Based on the information presented here, what is the opportunity cost of seeing Bruce Springsteen?

Individual problem 3-3: Due to the housing bubble, many houses are now selling for much less than their selling price just two or three years ago. There is evidence that homeowners with virtually identical houses tend to ask more if they paid more for the house. What fallacy are they making?

Salvatore’s Chapter 3:

a. Discussion Questions: 9.

b. Problems: 1(a), 7, and 9.

Discussion Question 9: How would you react to a sales manager’s announcement that he or she has in place a marketing program to maximize sales?

Problem 1(a): Given the following total-revenue function: TR=9Q-Q2(a) Derive the total-, average-, and marginal- revenue schedules from Q=0 to Q=6 by 1’s.

Problem 7: Given the following total-cost schedule, Derive the average-and marginal-cost schedules

Problem 9: With the total-revenue curve of Problem 1 and the total-cost curve from

Froeb et al.’s Chapter 4:

a. Individual problems: 4-5 and 4-6.

Individual problem 4-5: Your new insurance firm processes claims through its newer, larger high-tech facility and its older, smaller low-tech facility. Each month, the high-tech facility handles 10,000 claims, incurs \$100,000 in fixed costs and \$100,000 in variable costs. Each month, the low-tech facility handles 2,000 claims, incurs \$16,000 in fixed costs and \$24,000 in variable costs. If you anticipate a decrease in the number of claims, where will you lay off workers?

Individual problem 4-6: A copy company wants to expand production. It currently has 20 workers who share eight copiers. Two months ago, the firm added two copiers, and output increased by 100,000 pages per day. One month ago, they added five workers, and productivity also increased by 50,000 pages per day. Copiers cost about twice as much as workers. Would you recommend they hire another employee or buy another copier?