. On the first day of the new year to get her business started, th(s owntir/photoor of Exquisite…

. On the first day of the new year to get her business started, th(s owntir/photoor of Exquisite Portraits Inc. paid $200 for business cards, $1,000 for a listing in Pages, and $250 for an annual business license. She also leased a profvssionn1 p camera and studio lighting equipment by signing an agreement in pay a monthly of $1,000 each month for the next 12 months. This lease is ironclad: She must pity 12 months and she cannot sublease to anyone else. She rents her office and stud $1,400 per month that must be paid at the beginning of each month. She does not a lease on the office/studio, so she can vacate the office/studio at the end of any should she decide to move to a new location or to go out of business. After silo a the office/studio on the first day of each month, her monthly cost of electricity lighting the office and running her coffee machine is constant at $45 per month, cause she always keeps the lights on in the office and drinks the same amount of co no•matter how many photos she shoots each month. Additional electricity is rev for the portrait studio lights, which varies directly with the number of hours the 11 are used each month for photo sessions. Last year, before starting this business owner of Exquisite Portraits Inc. earned a salary of $5,000 per month working A bank. Answer the following questions about the costs for Exquisite Portraits Inc.: a. What are monthly fixed costs, quasi-fixed costs, and variable costs for Exqui Portraits Inc.? b. If the owner of Exquisite Portraits Inc. wants to close her studio and go out business at the end of August, identify her sunk costs and avoidable costs. c. At the end of August, what role would the sunk costs play in the owner/photo pher’s decision to go out of business? d. In making her decision to start her own business, would her decision have be more or less difficult to make if sunk costs were zero at Exquisite Portraits? Explain’ 2. At a management luncheon, two managers were overheard arguing about the follow’ ing statement: “A manager should never hire another worker if the new person cause diminishing returns.” Is this statement correct? If so, why? If not, explain why not. 3. Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of unleaded gasoline. They estimated that in magi production the car would cost $40,000 per unit to build. The engineers argued that Congress should force U.S. autornakers to build this energy-efficient car. a. Is energy efficiency the same thing as economic efficiency? Explain. b. Under what circumstances would the energy-efficient automobile described here be economically efficient? c. If the goal of society is to get the most benefit from its limited resources, then why not ignore economic efficiency and build the energy-saving automobile?

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