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Economics HW

Multiple Choice

1) You turned down a job at ABC Corp last year that would have paid you $125,000 per year and started your own company.  When you calculated your economic profit, it came out at $0.  You expect the business will be exactly the same next year. 

ABC called and said you could still take the job.  You should… 
A. Keep running your company as-is.
B. Keep running your company but pay yourself less.
C. Keep running your company but pay yourself more.
D. Shut down your company and take the job at ABC.

2) You’re a milk company in a highly competitive market.  The market price of hay and alfalfa, your cows’ favorite food, has recently dropped. 
Which of the following is likely true?
A.The price elasticity of demand for your milk decreases
B. You can charge a higher price for milk
C. Your company’s demand curve has fallen
D. Your shut down point becomes larger

Open-Ended

An article in Forbes magazine in 2013 discussed the reasons for the ability of Starbucks to remain profitable despite competition.  The author argued the most important reason for the firm’s success was “Right market segmentation. The company has stayed with the upper-scale of the coffee market, competing on comfort rather than convenience…”  What does the author mean by “market segmentation?  What does the author mean by the “upper-scale” of the coffee market?  P. Mourdoukoutas, Starbucks and McDonald’s Winning Strategy.  Forbes, April 25, 2013.  Initial Response should be at least 250 words and should include at least one reference in APA format. 
(Article Link: Starbuck’s and McDonald’s Winning Strategy)

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