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Sunshine Pest Control, Inc




2 - Sunshine Pest Control, Inc., provides exterminator services to residences in the Miami area. The primary resources SPC employs are skilled exterminators and large dome/air pumps used to cover the homes, pump in insecticide, and minimize leakage to the environment. Currently, SPC employs 10 exterminators at a cost of $15 per hour, employs 2,000 hours of pump time each week at a cost of $3 per hour. Each exterminator works a 40-hour week. This level of employment allows SPC to complete 100 treatments per week for which the firm receives $100 each. A. Assuming that both returns to factors and returns to scale are constant, what are the marginal products for (1) exterminators and (2) gallons of chemicals? B. Is SPC employing labor and domes in an optimal ratio, assuming that substitution of the resources is possible? Explain. C. Determine the marginal revenue products for exterminators and for the domes/pumps employed by SPC. (Assume constant returns to factors in part A.) D. Is SPC employing an optimal (profit-maximizing) quantity of labor and computer time? Explain.;3 - The Fun-Land Amusement Park is a 40-acre fun park full of rides, shows, and shops. Fun-Land's marketing department segments its customer base into two parts: local patrons and tourists. Fun-Land assumes local patrons are more price sensitive than out-of-town tourists. Yearly demand and marginal revenue relations for overnight lodging services, Q, are as follows: Locals PL = $40 - $0.0005QL MRL = TRL/ QL = $40 - $0.001QL Tourists PT = $50 - $0.0004QT MRT = TRT/ QT = $50 - $0.0008QT Average variable costs for labor and materials are constant at $20 per unit. A. Assuming the company can discriminate in pricing between locals and tourist customers through coupons distributed to locals via local shops, calculate the profit-maximizing price, output, and total profit contribution levels. B. Calculate point price elasticities of demand for each customer class at the activity levels identified in part A. Are the differences in these elasticities consistent with your recommended price differential? Explain.


Paper#24693 | Written in 18-Jul-2015

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