Producer Surplus Discussion

Question Description
MBA 5010 Week 6 Assignment (Rev 2)

The weekly assignments are intended to be completed individually. It is important in an online program that you pay careful attention to when it is and is not appropriate to work with peers. Misunderstandings can have significant consequences. By submitting this assignment, you are attesting that you completed this work without assistance from another current or former student of this class. Exceptions can be made for tutors, but only with prior consent from your instructor.

Your answer will be evaluated based on correctness, completeness, and clarity. Be attentive to your writing. You have until midnight CST Sunday to submit both parts of this assignment.

Part A (25 Points)

Joe’s Plain-o Bikes makes and sells a single model of a basic single speed bike. Joe sells the bike to low-end bike shops for $75. They in turn retail the bike for $150. Joe’s cost of making each bike is $25 and his overhead averages out to around another $25. Answer the following:

 

Question 1 – What is Joe’s profit (or margin) per bike?

Respond here

Question 2 – What is Joe’sproducer surplus per bike?

Respond here

Question 3 – What happens to consumer and producer surplus if he lowers the price to zero?

Respond here

The bus service the Meanwells began is the only one in their small city. We’ll also assume there’s no other alternative form of public transportation.

Question 4 – For each of the determinants of elasticity, speak directly to its impact on the price sensitivity of the bus service.

Respond here

Question 5 – Outline one proactive step the Meanwells might take to reduce the price sensitivity of their bus service so they can increase the price charged?

Respond here

Part B (25 points)

This week you are to complete a FINAL response to the following questions. The class will be divided into groups so you and your peers may collaborate on Part B of this assignment. This final response will be evaluated on content as well as completeness and clarity.

In week 1, we analyzed the sharing economy. This week, you’re going to build on the knowledge you gained. Your assignment is to deconstruct the economics underlying AirBnB. Specifically, I want you to answer the following questions:

• What resources are being shared?

• What is the opportunity cost of the resources “consumed” to facilitate this sharing?

• How does this create value for customers?

• Does the value created for customers outweigh the opportunity cost of the resources consumed?

• Does AirBnB capture a sufficient amount of any value generated to remain a viable business?

The purpose of this question is to provide you an opportunity to demonstrate your understanding of the economics of value creation. So, emphasize this aspect of your answer. Shoot for 500 words, although no one is going to count so long as you’re close.

Respond here