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A food-products company has recently introduced a new line of fruit pies in six U.S. cities: Atlanta, Baltimore, Chicago, Denver, St. Louis, and Fort Lauderdale. Based on the pie

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Tod Thiel
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5 Feb 2019

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Related questions

Shelly Acres, whose grandmother gave her a family recipe for making pies, loved to cook, and she decided to start a business she called Mrs. Acres Homemade Pies. The company produces specialty pies and sells them in local supermarkets and select family restaurants. In each of the first six months, Shelly and three part-time employees sold 2,000 pies for $4.50 each, netting $1.50 profit per pie. The pies were quite successful and Shelly could not keep up with demand. The company's success results from a quality product and productive employees who are motivated by incentives and who enjoy being part of a successful new business.

To meet demand, Shelly expanded operations, borrowing money and increasing staff to four full-time employees. Production and sales increased to 8,000 pies per month, and profits soared to $12,000 per month. However, demand for Mrs. Acres Homemade Pies continues to accelerate beyond what Shelly can supply. She has several options:

(1) maintain current production levels and raise prices;

(2) expand the facility and staff while maintaining the current price; or

(3) contract the production of the pies to a national restaurant chain, giving Shelly a percentage of profits with minimal involvement.

Required:

1. Explain and demonstrate the relationship between supply and demand for Mrs. Acres Homemade Pies.

2. What challenges does Shelly face as she considers the three options?

3. What would you do in Shelly's position?

In 2008, the Board of Directors and shareholders of Anheuser Busch agreed to be acquired by a Belgian Brewer (InBev). Prior to the merger, InBev made many pledges to AB regarding how the company would operate after the merger, how its employees would be treated, and so on. With some stipulations, the U.S. Government agreed to allow the merger.

Since the merger, InBev has laid off a significant number of Anheuser Busch employees, most of whom worked at the St. Louis headquarters. Where the merger created duplication of job duties, those being terminated have to-date been from AB, not InBev. There is a great deal of speculation and trepidation around the St. Louis area about the long-term fate of the remaining employees, as well as worry about how the new company will view the many and varied civic contributions the company has made to St. Louis and the many other U.S. areas in which it has operations.

View 1 - AB acted as a well-managed business that takes the actions necessary to remain competitive in a very competitive market. If AB had not approved the merger, its profits and stock price would have fallen, and investment capital would have fled the company. As difficult as the decision was, AB operates in a very competitive environment and owes its stockholders the best return it can provide.

View 2 - The decision to sell the company was both short-sighted and, ultimately, a bad business decision. Any short term benefits AB stockholders reaped from the merger will be more than offset by U.S. job losses, lower tax revenues for States and the U.S. Government, and damage to the U.S. communities in which the company operates. Employees whose employers are loyal to them during difficult times repay that loyalty to the company through hard work. Employees who view themselves as economic pawns to be added or discarded as needed will feel only a marginal commitment to the new AB and their work performance will reflect the negative opinion they hold of their employer.

Let's hear your thoughts. Don't just tell us what you think personally, but bring Managerial Economic theory to bear on this issue.

1.Rent Seeking Questions in Monoploly Markets

a) In Florida, home solar panels can only be purchased from the local power company. Who is helped by these laws? Who is hurt?

b) A number of cities place special limits on food trucks. For example, in Chicago, food sold from a food truck must be cooked elsewhere. Who is helped by these laws? Who is hurt?

c) Florida requires commercial interior designers to be licensed. Potential designers must complete six years of schooling and apprenticeship and pass a two-day exam. Who is helped by these laws? tWho is hurt?

d) In Oklahoma, it is illegal to sell a coffin, unless you are a licensed funeral director. Becoming licensed requires several years of college, serving an apprenticeship and passing two exams. Who is helped by these laws? Who is hurt?

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