Unit 6 Assignment

Student Name:

Please answer the following questions. Submit as a Microsoft Word® document to the Dropbox when completed.

1. Do the firms in an oligopoly act independently or interdependently? Explain your answer.

2. A monopolistically competitive firm has the following demand and cost structure in the short run:

Output Price FC VC TC TR Profit/Loss

0 $90 $90 $ 0 ____ ____ ________

1 80 ____ 40 ____ ____ ________

2 70 ____ 80 ____ ____ ________

3 60 ____ 140 ____ ____ ________

4 50 ____ 220 ____ ____ ________

5 40 ____ 320 ____ ____ ________

6 30 ____ 440 ____ ____ ________

7 20 ____ 580 ____ ____ ________

a. Complete the table.

b. What level of output maximizes profit or minimizes loss?

c. Should this firm operate or shut down in the short run? Why?

3. Suppose that Wal-World and Tarbo are independently deciding whether to implement a new bar code technology. It is less costly for their suppliers to use one system and the following payoff matrix shows the profits per year for each company resulting from the interaction of their strategies.

a. Briefly explain whether Wal-World has a dominant strategy.

b. Briefly explain whether Tarbo has a dominant strategy.

c. Briefly explain whether there is a Nash equilibrium in this game.

Directions for Submitting your Assignment

Complete your Assignment in this Microsoft Word® document and save it as Username-MT445Assignment-Unit#.doc (Example:TAllen-MT445Assignment-Unit6.doc). Submit your file by selecting the Unit 6: Assignment Dropbox by the end of Unit 6.

Practical Exercise -

The Manager of Network Support at MBUSA has asked you to issue a transport tender to four Vendors for transport services for 68 Dealers in the Chicago Area.

The service you requested is Dealer Direct Service (DDS) and you requested all Vendors to bid on all 68 Dealers for a three year period.

You advised Vendors to assume a fuel price of $3.50 per gallon, fuel is charged separately and in addition to the cost per mile.

You requested the Vendors to provide you with the following information:

· The total number of routes required in order to complete the deliveries to all 68 Dealers

· The number and mix of trailers that would be required to complete the deliveries to all 68 Dealers

· Their Driver turnover, attendance and accident rate

· The annual number of miles that would be driven to complete their proposed delivery routes and the cost per mile that MBUSA would be charged for the service

· Any startup costs that the Vendor would charge MBUSA for the setup of the service

On the attached sheet you will find the Vendor submissions with the data requested, analyze the Vendor submissions and calculate the following information:

· The total annual cost to MBUSA based on the miles and cost per mile

· The total fuel cost assuming a cost of 6.25mpg

· The total costs in year 1, 2 and 3

· Make a recommendation, based on the available information, on the best Vendor to award the contract to

Prepare a 15 minute presentation and in no more than 5 slides describe the following:

· The major challenges facing the Automotive Industry in the USA in 2011

· The major challenges facing MBUSA’s Parts Business in 2011

· The summary of the analysis of the Vendor submissions and the results of your calculations

· Your recommendation, based on the available information, on the best Vendor to award the contract to. Please include the rationale for your recommendation and the potential cost saving from MBUSA based on the current contract cost.