Essay
Always Round Tire hires Plain Truth Advertising to write copy for its newspaper advertisements. Always Round has a demand for advertising of MB = 400 -2S where S is the number of hours that Plain Truth delivers. If Plain Truth has a fixed supply cost: MC = $150 per hour, what are the number of hours that Always Round purchases from Plain Truth? Now, if the copy writers are slackers and only deliver 100 hours of work each week, and if the each company must spend $1,250 in monitoring and bonding costs, what is the surplus and residual loss in this environment?
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If S=100 because of shirking by slackers...View Answer
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