Mba-540 Mid-Term Essay

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MBA 540 Mid-term Exam 1. (10 pts.) Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new car. How would understanding the concept of opportunity costs help her make a decision? By understanding the concept of opportunity costs, Stella can better decide whether or not it is a good value to her to purchase a new car or not. She would be able to analyze the explicit (direct dollar expenditure) and implicit (associated trade-off) opportunity costs of the purchase decision. She would not only figure out how much she could afford for down payment and monthly payments, but also take into consideration the costs of insurance, taxes, fuel economy and maintenance of the new car versus the same of her old car. If the value of purchasing the new car outweighs the cost of keeping the old one, then she can better make a decision. (Brickley, J., et al., 2009, p.20) 2. (10 pts.) Referring to the table below, hiring a driver costs $10. Each machine costs $100. Which method should he use and why? The method he should choose is Method 2 for two main reasons. First, it is more economical to use Method 2 in comparison to the other methods as shown below: Method 1: 20 x 10 = $200 + 10 x 100 = $1,000 [$1,200 total cost] Method 2: 50 x 10 = $500 + 2 x 100 = $200 [$700 total cost] Method 3: 100 x 10 = $1,000 + 0 = 0 [$1,000 total cost] Method 4: 10 x 10 = $100 + 12 x 100 = $1,200 [$1,300 total cost] Secondly, 50 drivers in Method 2 can more efficiently deliver to the 50 spots required in the scenario. 3. (10 pts.) Enron will be an example of a dysfunctional company for many years to come. It was clearly a company riddled with fraud and excess and its conduct drove it into bankruptcy. The text argues that individual behavior was not at the core of Enron’s problems. What were the problems with this corporation from

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