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Economics
Illustrate the example of the world sugar market with supply and demand diagrams. Be sure to show how the relative shifts in supply and demand have led to the reduction in the world price of sugar.
Over the years, the market demand for "long-playing records made of polyvinyl has fallen considerably as new technologies replaced the old "LP." Yet, LPs are still available for sale and they sell at
Suppose a firm has the following demand equation: Q = 1,000 - 3,000P + 10A Where Q = quantity demanded P= product price (in dollars) A = advertising expenditure (in dollars) Assume for the following
State the general meaning of elasticity as it applies to economics. Define the price elasticity of demand.
Suppose the federal tax on gasoline increased by 5 cents per gallon. Do you think that such in increase, reflected in the price of gasoline, would have a significant impact on gasoline consumption?
Why do you think that whenever governments (federal and state) want to increase revenues they usually propose an increase in taxes on cigarettes and alcohol?
If a demand curve facing a firm is horizontal or nearly so. what does it say about this firm's competition?
A company faced by an elastic demand curve will always benefit by decreasing price. True or false? Explain.
Discuss the income elasticities of the following consumer products: a. Margarine b. Fine jewelry c. Living room furniture d. Whole lobsters
When prices of used cars dropped about 10 percent in October 2001, their sales increased by 4.5 percent. Does this mean that the demand elasticity for used cars is 0.45?
The U.S. Postal Service has been raising postal rates on a regular basis. The service had been losing money. One of the reasons is increased competition from companies such as United Parcel Service
A Canadian apparel company, Roots, agreed to provide the U.S. (Olympic team at the 2002 Winter Olympics with various types of clothing, including berets, for free, and further, to turn over a portion
Explain the difference between point elasticity and arc elasticity. What problem can arise in the calculation of the latter, and how is it usually dealt with? In actual business situations, would you
It has often been said that craft unions (electricians, carpenters, etc.) possess considerably greater power to raise wages than do industrial unions (automobile workers, steel workers, etc.). How
Discuss die- relative price elasticity of the following products: a. Mayonnaise b. A specific brand of mayonnaise c. Chevrolet automobiles d. Jaguar automobiles d. Washing machines e. Air travel
What would you expect to happen to spending on food at home and spending on food in restaurants during a decline in economic activity? How would income elasticity of demand help explain these changes?
Would you expect the cross-elasticity in confidents between each of the following pairs of products to be positive or negative? Why? a. Personal computers and software b. Electricity and natural
Why is it unlikely that a firm would sell at a price and quantity where its demand curve is price inelastic?
The immediate effect of gasoline price increases in the aftermath of the Persian Gulf crisis in August 1990 on gasoline consumption was not very significant. Would you expect the consumption of
Given the demand equation Q = 1,500 - 200P, calculate all the numbers necessary to fill in the following table:
Would you expect cross-price elasticity between the following pairs of products to be positive, negative, or zero? a. Television sets and DVRs b. Rye bread and whole wheat bread c. Construction of
In order to attract more customers on Mondays (a slow day), Alex's Pizza Shop in Austin decided to reduce the price of their pizza rolls from $3.50 to $2.50. As a result, Monday sales increased from
According to a study, the price elasticity of shoes in the United States is 0.7, and the income elasticity is 0.9. a. Would you suggest that the Brown Shoe Company cut its prices to increase its
A book store opens across the street from the University Book Store (UBS). The new store carries the same textbooks but offers a price 20 percent lower than UBS. If the cross-price elasticity is
The Compute Company store has been selling its special word processing software, Ace-word, during the last 10 months. Monthly sales and the price for Aceword are shown in the following table. Also
The demand curve for product a is given as Q = 2000 - 20 P.a. How many units will be sold at $10?b. At what price- would 2,000 units he sold? 0 units? 1,500?c. Write equations for total revenue and
The Transportation Authority in Anytown, USA, raised bus fares from $1 to $1.15 on January 1, 2011. The authority's statistics show that the number of passengers riding buses decreased from 672,000
(Read the "Newspapers and 1 heir Price Elasticity" section in Appendix 4A before answering the question.) What is the arc demand elasticity for the London Times? What happened to revenue as a result
The demand function for a cola-type soft drink in general is Q = 20 - 2P, where Q stands for quantity and P stands for price.a. Calculate point elasticities at prices of 5 and 9. Is the demand curve
The Distinctive Fashions Company increased its advertising budget for its leading brand of women's yoga apparel from $10,000 in 2011 to $15,000 in 2012. Its sales increased from 900 units to 1,050
Manning Inc., is the leading manufacturer of garage doors. Demand for residential garage door sales depends, of course, on the rate of new house building activity, which in turn depends on changes in
When the iPhone was launched in the second quarter of 2008, it was priced at $599, and Apple sold 270.000 units during this quarter. In mid-September of that year, Apple reduced the price to $434,
ABC Sports, a store that sells various types of sports clothing and other sports items, is planning to introduce a new design of Arizona Diamondbacks' baseball caps. A consultant has estimated the
The equation for a demand curve has been estimated to be 0 - 100 - 10 P + 0.5 Y, where Q is quantity, P is price, and K is income. Assume P = 7 and Y = 50.a. Interpret the equation.b. At a price of
Mr. Smith has the following demand equation for a certain product: Q = 30 - 2P. a. At a price of $7, what is the point elasticity? b. Between prices of S5 and $6, what is the arc elasticity? c. If
The Teenager Company makes and sells skateboards at an average price of $70 each. During the past year, they sold 4,000 of these skateboards. The company believes that the price elasticity for this
The ABC Company manufactures digital clock radios and sells on average 3,000 units monthly at $25 each to retail stores. Its closest competitor produces a similar type of radio that sells for $28. a.
The Mesa Redbirds football team plays in a stadium with a seating capacity of 80,000. However, during the past season, attendance averaged only 50,000. The average ticket price was $30. If price
The Efficient Software Store had been selling a spreadsheet program at a rate of 100 per month and a graphics program at the rate of 50 per month. In September 2012, Efficient's supplier lowered the
"The best forecasting method is the one that gives the highest proportion of correct predictions." Comment.
You have been asked to produce a forecast for your company's product, bottled water. Discuss the kind of information you would look for in order to make this forecast.
Explain the difference between time series data and cross-sectional data. Provide examples of each type of data.
Would there be any differences in the set of variables used in a regression model of the demand for consumer durable goods (e.g., automobiles, appliances, furniture) and a regression model of the
Briefly explain the meaning of R2. A time series analysis of demand tends to result in a higher R than one using cross-sectional data. Why do you think this is the case?
Summarize the steps involved in conducting the t-test. What is the basis for using the "rule of 2" as a convenient method of evaluating i-ratios?
Briefly explain the meaning of the F-test. Why do you think this test is considered to be more important in multiple regression analysis than it is in simple regression analysis?
What is multicollinearity? How can researchers detect this problem? What is the impact of this problem on the regression estimates? What steps can be taken to deal with this problem?
What is the identification problem? What effect will this problem have on the regression estimates of a demand function? Explain.
Enumerate methods of qualitative and quantitative forecasting. What are the major differences between the two?
Discuss the benefits and drawbacks of the following methods of forecasting: a. Jury of executive opinion b. The Delphi method c. Opinion polls Each method has its uses. What are they?
a. Why are manufacturers' new orders, nondefense capital goods, an appropriate leading indicator? b. Why is the index of industrial production an appropriate coincident indicator? c. Why is the
Discuss some of the important criticisms of the forecasting ability of the leading economic indicators.
Manhattan was allegedly purchased from Native Americans in 1626 for $24. If the sellers had invested this sum at a 6 percent interest rate compounded semiannually, how much would it amount to today?
The compound growth rate is frequently used to forecast various quantities (sales, profits, and so on). Do you believe this is a good method? Should any cautions be exercised in making such
Describe projections that use either moving averages or exponential smoothing. Under what conditions can these techniques be used? Which of the two appears to be the more useful?
How do econometric models differ from "naive" projection methods? Is it always advisable to use the former in forecasting?
One of the most difficult tasks in regression analysis is to obtain the data suitable for quantitative studies of this kind. Suppose you are trying to estimate the demand for home furniture. Suggest
In the Columbia Gas of Ohio study that forecasted the demand for gas (see p. 155), the company developed the following coefficients for their equation: Growth
The sales data for the Lonestar Sports Apparel Company for the last 12 years are as follows:a. What is the 2001-2012 compound growth rate? b. I sing the result obtained in part a, what is your 2013
Based on past data, Mack's Pool Supply has constructed the following equation for the sales of its house brand of chlorine tablets: Q = 1,000 + 100 t where Q is quantity and t is time (in years),
The sales data over the last 10 years for the Acme Hardware Store are as follows:a. Calculate the compound growth rate for the period of 2003 to 2012. b. Based on your answer to part a, forecast
The Miracle Corporation had the following sales during the past 10 years (in thousands of dollars):a. Calculate a trend line, and forecast sales for 2013. How confident are you of this forecast? b.
You are the manager of a large automobile dealership who wants to learn more about the effectiveness of various discounts offered to customers over the past 14 months. Following are the average
The maker of a leading brand of low-calorie microwavable food estimated the following demand equation for its product using data from 26 supermarkets around the country for the month of April:Assume
A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product:The
You are given the following demand for European luxury automobiles: Q = l,000P-0.93PA0.75Pj1.2I1.6 where P = Price of European luxury cars PA = Price of American luxury cars PA = Price of Japanese
You have the following data for the last 12 months' sales for the PRQ Corporation (in thousands of dollars):a. Calculate a 3-month centered moving average. b. Use this moving average to forecast
Office Enterprises (OE) produces a line of metal office file cabinets. The company's economist, having investigated a large number of past data, has established the following equation, of demand for
An economist has estimated the sales trend line for the Sun Belt Toy Company as follows:St = 43.6 + 0.8tSt represents Sun Belt's monthly sales (in millions of dollars), and t - 1 in January 2008. The
The MNO Corporation is preparing for its stockholder meeting on May 15, 2013. It sent out proxies to its stockholders on March 15 and asked stockholders who plan to attend the meeting to respond. To
Explain the difference between a short-run and long-run production function. Cite one example of this difference in a business situation.
What are the two statistical methods most frequently used to estimate production functions? What are the advantages and disadvantages of each method?
Design a study of a production function for a steel mill and another one for a call center. Which variables would you use and what statistical method would you select for each function? In general,
What are the properties of the Cobb-Douglas function Q = aLbK1-b. What conceptual change occurs when the equation is changed to Q = aLhK?
When a Cobb-Douglas function with at least two inputs shows the existence of constant returns to scale, it implies that the marginal product of each input is diminishing. True or false? Explain.
Write a production function equation that expresses the existence of diminishing marginal returns. How will this equation differ from one that shows both increasing and decreasing marginal returns?
Define the law of diminishing returns. Why is this law considered a short-run phenomenon?
What are the key points in a short-run production function that delineate the three stages of production? Explain the relationship between the law of diminishing returns and the three stages of
Explain why a firm's adherence to the MRP = MFC rule enables it to find the optimal number of units of a variable input to use in the short-run production process.
Define returns to scale. Why is this considered a long-run phenomenon?
According to the rule for optimal input usage, a firm should hire a person as long as her marginal revenue product is greater than her marginal cost to the company. It is well known that many
Explain the relationship between marginal product and average product. Why can we expect marginal product to equal average product at average product's maximum point?
Cite and discuss possible reasons a firm may actually find itself operating in Stage I or Stage III of the short-run production function.
Discuss the problems of measuring productivity in actual work situations. How might productivity be measured for each of the following industries? a. Education (e.g., elementary and secondary
Indicate whether each of the following statements is true or false. Explain why. a. When the law of diminishing returns takes effect, a firm's average product will start to decrease. b. Decreasing
The Brady Corporation has eleven plants located around the world. In a recent year, the data for each plant gave the number of labor hours (in thousands), capital (total net plant assets, in
Show what will happen to the diagram above as a result of the changes listed. a. The firm's budget increases. b. The price of Y decreases. c. The price of X decreases. d. Y becomes more expensive,
Following are different algebraic expressions of the production function. Decide whether each one has constant, increasing, or decreasing returns to scale. a. Q = 75L0.25 K0.75 b. Q = 75A0.15 B0.40
Use the production matrix presented to answer the following questions.a. Determine the returns to scale for this matrix. (Start with one unit of X and one unit of Y.) b. Suppose the firm has a budget
The economist for the ABC Truck Manufacturing Corporation has calculated a production function for the manufacture of their medium-size trucks as follows: Q= 1.3L0.75K0.3 where Qis number of trucks
The Oceanic Pacific fleet has just decided to use a pole-and-line method of fishing instead of gill netting to catch tuna. The latter method involves the use of miles of nets strung out across the
A firm has the following short-run production function: Q = 50 L + 6L2 - 0.5L3 where Q = Quantity of output per week L = Labor (number of workers) a. When does the law of diminishing returns take
The owner of a small car rental service is trying to decide on the appropriate numbers of vehicles and mechanics to use in the business for the current level of operations. He recognizes that his
An American company that sells consumer electronics products has manufacturing facilities in Mexico, Taiwan, and Canada. The average hourly wage, output, and annual overhead cost for each site are as
The owner of a car wash is trying to decide on the number of people to employ based on / the following short-run production function: Q = 6 L - 0.5L2 where Q = Number of car washes per hour L =
A The Noble Widget Corporation produces just one product, widgets. The company's new economist has calculated a short-run production function as follows: Q = 7V + 0.6V2 - 0.1 V5 where Q is the number
Suppose Noble's production function (see Problem 7) is as follows: Q = 7V - 0.5V2 where Q is the number of widgets produced per day and Vis the number of production workers working an 8-hour day. a.
The International Calculator Company of China produces handheld calculators in its plant. It tries to keep the number of workers in the plant constant so the only variable factor that can be measured
Define and compare the following types of cost: a. Sunk cost versus incremental cost b. Fixed cost versus variable cost c. Incremental cost versus marginal cost d. Opportunity cost versus
Define the experience curve. Compare its impact on a firm's cost function with that of the learning curve.
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