Needed tonight

1. To make a practical decision, Stella need to consider the alternatives and whether they are better or worse for her .In this case, Stella should consider where she lives, the price of a new car. Also Stella would need to consider her salary and monthly budget would need to be analyzed as to whether she could afford spending the money purchasing a new car or keep the money and find alternate transportation to work including the possibly of carpooling. In this regard, the concept of opportunity costs comes into play. If Stella develop an idea about opportunity cost, it will render the decision of buying a car easy. Opportunity cost is defined as a particular action is the value of the next best alternative, which is forgone in doing that particular activity. In this case, the opportunity cost of buying a car for Stella is the value of the second best alternative for Stella, i.e. what Stella could have done with the money if she had not bought the car.

3. In bankruptcy cases filing does not necessarily mean that a company must ceases to exist. It simply means that Enron is not in a position to fulfill its contractual obligations and henceforth wants protection from its creditors through bankruptcy court. In return for holding the creditors in abeyance the court takes charge of arranging the ultimate disposition of the company's assets in satisfying the debts of the company. Enron was not devoid of assets. It in fact had billions of dollars’ worth of assets. But its problem was that it had more liabilities than it had assets. The economic view of behavior would suggest that partners were acting in their own self interest given the costs and benefits that they faced. Thus there became cash flow problems. They were like “white elephants”. A white elephant is an asset that is potentially valuable but at the present has no benefit. In 1999 Jeff Skilling was raising cash by selling off assets. The assets for which there was a market, such as Enron Oil and Gas, were the ones that were well-run and producing cash. Skilling sold Enron 53% interest in Enron Oil and Gas for about $600 million. This was some help but Enron had a burn rate for cash in its various projects that was at the hundreds of millions of dollars level. Skilling did try in 2000 to sell Enron's herd of international white elephants, projects that had a book value of upwards of $7 billion, to investors in the United Arab Emirates but the deal fell through. However, as the CEO Skilling made the wrong decisions based on his overconfidence to operate Enron’s’ project successfully. Combining with the deliberate accounting oversights that were predicated to save Enron from financial breakdown but was disastrous. Enron also indulged in the some expensive and unnecessary lavish perks like purchasing several corporate chartered jets for senior executives and rewarding high performers with excessive bonuses. These high-performers became overzealous whether making right or wrong decisions they would do anything to get a bonus. From an organizational architecture point of view, Enron’s didn’t have a solid foundation or strategy, when operating the company. In order for a company to be successful, its strength can be measure in the firm’s strategy and architecture (Brickley, Smith & Zimmerman, 2009, p. 272).

4.

Many corporations such as utility companies have high fixed costs – a major portion of the cost of production is fixed in the short run. For example, consider the power industries. Thermal power plants have high gestation period. These industries generally have very low marginal cost. Once the gestation period is over, the firm starts to earn high economic profit with very low operating cost. This helps the firm to recover its fixed costs incurred. Thus in making output and pricing decisions in the short run, these huge fixed costs can be ignored because these costs will be recovered slowly in the long run. Hence output and price will be set with long run perspective. However, if fixed cost must be ignored at any time, they should only be ignored in the short run, since it is most likely that variable costs are being covered by company revenue large fixed costs cannot be ignored long term. They can use short term, temporarily, when they don’t vary with output and pricing (Brickley, Smith & Zimmerman, 2009, p. 158). If a company uses fixed costs long term, they will eventually shut down and cease operating, due to this method. Long term costs are variable, such as fuel, labor, and raw material.

5

Dell is one of the well-known companies in the computer industry. There are some few more companies in this computers and peripherals industry like Lenovo, HP, Apple Inc. etc. Profit level of Dell Inc. is highly dependent on all the other competitive firms. This mutual interdependence is the main characteristics. Thus Dell Inc. is an example of oligopolistic market.

Product pricing plays a very important role in this market. Since this is an oligopolistic market, profits are very much interdependent. Therefore, Dell has to consider the reaction functions of the other firms also while making its pricing strategy.

Since Dell operates in an oligopoly market, there is active competition among the firms. The profit function of a firm is dependent on the profit function of all the other firms in the industry. Therefore each firm has to take its pricing strategy carefully. There are also other factors on which Dell should concentrate. We know that advertisement plays an important role in oligopoly. Therefore, Dell should also focus on advertisement. It should increase the cost behind advertising to attract more customers and enjoy an edge over the others. Another important strategy is disintermediation, i.e. cutting out the middleman. Deleting a player in the distribution chain is a risky move, but can result in a substantial reduction in operating costs and dramatically improved margins.

[Type here]