New Semester
Started
Get
50% OFF
Study Help!
--h --m --s
Claim Now
Question Answers
Textbooks
Find textbooks, questions and answers
Oops, something went wrong!
Change your search query and then try again
S
Books
FREE
Study Help
Expert Questions
Accounting
General Management
Mathematics
Finance
Organizational Behaviour
Law
Physics
Operating System
Management Leadership
Sociology
Programming
Marketing
Database
Computer Network
Economics
Textbooks Solutions
Accounting
Managerial Accounting
Management Leadership
Cost Accounting
Statistics
Business Law
Corporate Finance
Finance
Economics
Auditing
Tutors
Online Tutors
Find a Tutor
Hire a Tutor
Become a Tutor
AI Tutor
AI Study Planner
NEW
Sell Books
Search
Search
Sign In
Register
study help
business
economics
Managerial Economics and Strategy 1st edition Jeffrey M. Perloff, James A. Brander - Solutions
Gail works in a flower shop, where she produces 10 floral arrangements per hour. She is paid $ 10 an hour for the first eight hours she works and $ 15 an hour for each additional hour she works. What is the firm’s cost function? What are its AC, AVC, and MC functions? Draw the AC, AVC, and MC
The only variable input a janitorial service firm uses to clean offices is workers who are paid a wage, w, of $ 10 an hour. Each worker can clean four offices in an hour. Use math to determine the variable cost, the average variable cost, and the marginal cost of cleaning one more office. Draw a
A firm has a Cobb- Douglas production function, q = ALaKß, where a + ß < 1. On the basis of this information, what properties does its cost function have? For example, a U. S. chemical firm has a production function of q = 10L0.32 K0.56 (based on Hsieh, 1995). If it faces factor prices of w =
Equation 6.5 gives the short run variable cost function for Japanese beer as VC = 0.55q1.67. If the fixed cost is 600 and the firm produces 550 units, deter-mine the C, VC, MC, AFC, and AVC. What happens to these costs if the firm increases its output to 600?
A firm builds shipping crates out of wood. How does the cost of producing a 1-cubic-foot crate (each side is 1-foot square) compare to the cost of building an 8-cubic-foot crate if wood costs $ 1 a square foot and the firm has no labor or other costs? More generally, how does cost vary with volume?
The invention of a new machine serves as a mobile station for receiving and accumulating packed flats of strawberries close to where they are picked, reducing workers’ time and burden of carrying full flats of strawberries. According to Rosenberg (2004), a machine- assisted crew of 15 pickers
A bottling company uses two inputs to produce bottles of the soft drink Sludge: bottling machines (K) and workers (L). The isoquants have the usual smooth shape. The machine costs $ 1,000 per day to run and the workers earn $ 200 per day. At the cur-rent level of production, the marginal product of
Suppose that the government subsidizes the cost of workers by paying for 25% of the wage (the rate offered by the U. S. government in the late 1970s under the New Jobs Tax Credit program). What effect will this subsidy have on the firm’s choice of labor and capital to produce a given level of
The all-American baseball is made using cork from Portugal, rubber from Malaysia, yarn from Australia, and leather from France, and it is stitched (108 stitches exactly) by workers in Costa Rica. To assemble a baseball takes one unit each of these inputs. Ultimately, the finished product must be
California’s State Board of Equalization imposed a higher tax on “alcopops,” flavored beers containing more than 0.5% alcohol-based flavorings, such as vanilla extract (Guy L. Smith, “On Regulation of ‘Alcopops,’ ”San Francisco Chronicle, April 10, 2009). Such beers are taxed as
A U. S. electronics firm is considering moving its production to a plant in Mexico. Its estimated production function is q = L0.5 K0.5 (based on Hsieh, 1995). The U. S. factor prices are w = r = 10. In Mexico, the wage is half that in the United States, but the firm faces the same cost of capital:
What is the long- run cost function for a fixed-proportions production function for which it takes two units of labor and one unit of capital to produce one unit of output as a function of the wage, w, and the price of capital, r? What is the cost function if the production function is q = L + K?
In what types of industry would you expect to see substantial learning by doing? Why?
A firm’s learning curve, which shows the relation-ship between average cost and cumulative output (the sum of its output since the firm started producing), is AC = a + bN–r; where AC is its average cost; N is its cumulative output; a, b, and r are constants; and 0 < r < 1.a. What is the
In the Mini-Case “Learning by Drilling,” an oil drilling firm’s average cost when working with production company M depends partly on its own cumulative drilling experience, N, and partly on the cumulative amount of drilling it has done jointly with production company M. Would an average cost
The United Kingdom started regulating the size of grocery stores in the early 1990s, and today the average size of a typical U. K. grocery store is roughly half the size of a typical U. S. store and two-thirds the size of a typical French store (Haskel and Sadun, 2011). What implications would such
Laura sells mushrooms and strawberries to tourists. If Laura spends the morning collecting only mushrooms, she picks 8 pints; if she spends the morning picking strawberries, she collects 6 pints. If she picks some of each, however, she can harvest more total pints: 6 pints of mushrooms and 4 pints
A refiner produces heating fuel and gasoline from crude oil in virtually fixed proportions. What can you say about economies of scope for such a firm? What is the sign of its measure of economies of scope, SC?
In figure, show that there are wage rates and capital rental costs such that the firm is indifferent between using the wafer-handling stepper technology and the stepper technology. How does this wage/ cost of capital ratio compare to those in the C2 and C3 isocosts?
What types of firms would not normally maximize profit?
Describe three important consequences of “going public” by selling shares in an initial public offering.
What types of firm organization allow owners of a firm to obtain the advantages of limited liability?
A firm has three different production facilities, all of which produce the same product. While reviewing the firm’s cost data, Jasmin, a manager, discovers that one of the plants has a higher average cost than the other plants and suggests closing that plant. Another manager, Joshua, notes that
A firm has revenue given by R(q) = 100q – 3q2 and its cost function is C(q) = 100 + 10q. What is the profit-maximizing level of output? What profit does the firm earn at this output level?
Should a firm ever produce if it is losing money (making a negative economic profit)? Why or why not?
At the time of its initial public offering (initial sale of stock), Groupon, an Internet company that provides discount coupons, used unusual measures of its business performance (Michael J. de la Merced, “Abracadabra! Magic Trumps Math at Web Start-Ups,” dealbook.nytimes.com, June 17, 2011).
A firm that owns and manages rental properties is considering buying a building that would cost $ 800,000 this year, but would yield an annual revenue stream of $ 50,000 per year for the foreseeable future. For what range of interest rates would this purchase increase the present value of the firm?
Should a firm shut down if its weekly revenue is $ 1,000, its variable cost is $ 500, and its fixed cost is $ 800, of which $ 600 is avoidable if it shuts down? Why? 2.5.
A firm has to pay a tax equal to 25% of its revenue. Give a condition that determines the output level at which it maximizes its after-tax profit.
In Q& A 7.2, suppose that Ann’s compensation, Y, is half of the firm’s profit minus $ 30,000: Y = π / 2 – 30,000. Will she still seek to maximize the firm’s profit?
A firm’s revenue varies with its output: R(q). Its manager’s income, Y, equals aR(q), where 0 6 a 6 1 is the manager’s share of the firm’s revenue. Use calculus to prove that maximizing aR(q) implies the same output level, q, as maximizing R(q). What does this result imply about the
Three firms have identical revenue and profit functions with the same general shape as those in figure Firm 1 is a private sector firm operated by an owner- manager who wishes to maximize profit. Firm 2 is managed by an income- maximizing manager whose pay is proportional to the firm’s revenue.
Each of the three firms in Question 3.3 has a revenue function R(q) = 100q – 2q2 and a cost function C(q) = 100 + 20q. Determine how much output each firm chooses. C
Michael, the CEO of a successful firm, enjoys both income Y, and perquisites, S (such as a nice office and expensive office furniture). Michael’s utility function (Chapter) is U(S, Y) with normal (convex to the origin) indifference curves. Michael receives a base salary of M. He is able to
Inside directors of a firm are also executives of the firm, and they normally receive compensation that includes some form of profit sharing. Outside directors are not employees of the firm. They normally receive some compensation but do not have profit-sharing arrangements. Outside directors are
Why are steps taken by corporate management to avoid takeovers often not in shareholders’ best interests?
How does the market for corporate control encourage firms to maximize profits?
An acquiring firm, A, seeks to buy a target firm, T. The acquiring firm has better managers. The value of the target firm, if acquired by A, is $ 100 million. The value of the target firm under its current management is only $ 80 million. However, the managers of T can impose a poison pill that
In 2012, the Campbell Soup Company acquired Bolthouse Farms for $ 1.55 billion. This acquisition increased the level of vertical integration in Campbell, as Bolthouse Farms owned and operated extensive farming operations where it produced many food items used in Campbell’s products. Suppose that
Katie’s Quilts is a small retailer of quilts and other bed linen products. Katie currently purchases quilts from a large producer for $ 100 each and sells them in her store at a price that does not change with the number of quilts that she sells. Katie is considering vertically integrating by
A producer of ballpoint pens has been purchasing ink from an ink supplier and is considering acquiring the ink supplier. Would the pen company be more or less likely to vertically integrate by buying the ink manufacturer if the government taxes ink?
When the western part of the United States was sparsely populated, many small towns had a single schoolhouse in which one teacher taught all subjects to students of all ages. Nowadays, in large cities, teachers are often highly specialized, teaching a single subject, such as mathematics, to just
Which market structure best describes (a) airplane manufacturing, (b) electricians in a small town, (c) farms that grow tomatoes, and (d) cable television in a city? Why?
Consider the following change to Angelo’s situation in the Managerial Solution. Now Angelo can provide loans to only one of the two groups. If he loans to the safer group, he gets his 10% in Year 1 and faces the same choice in Year 2 with two new groups of borrowers. If he loans to the risker
A large city has nearly 500 restaurants, with new ones entering regularly as the population grows. The city decides to limit the number of restaurant licenses to 500. Which characteristics of this market are consistent with perfect competition and which are not? Is this restaurant market likely to
Why would high transaction costs or imperfect information tend to prevent price-taking behavior?
Mercedes-Benz of San Francisco advertises on the radio that it has been owned and operated by the same family in the same location for 50 years (as of 2012). It then makes two claims: first, that it has lower overhead than other nearby auto dealers because it has owned this land for 50 years, and
According to the “Oil, Oil Sands, and Oil Shale Shutdowns” Mini-Case, the minimum average variable cost of processing oil sands dropped from $ 25 a barrel in the 1960s to $ 18 due to technological advances. In a figure, show how this change affects the supply curve of a typical competitive firm
Many marginal cost curves are U-shaped. As a result, it is possible that the MC curve hits the demand or price line at two output levels. Which is the profit- maximizing output? Why?
Initially, the market price was p = 20 and the competitive firm’s minimum average variable cost was 18, while its minimum average cost was 21. Should it shut down? Why? Now this firm’s average variable cost increases by 3 at every quantity, while other firms in the market are unaffected. What
Should a firm shut down if its revenue is R = $ 1,000 per week, a. Its variable cost is VC = $ 500, and its sunk fixed cost is F = $ 600? b. Its variable cost is VC = $ 1,001, and its sunk fixed cost F = $ 500? c. Its variable cost is VC = $ 500 and its fixed cost is $ 800, of which $ 600 is
The cost function for Acme Laundry is C( q) = 10 + 10q + q2, so its marginal cost function is MC = 10 + 2q, where q is tons of laundry cleaned. Derive the firm’s average cost and average variable cost curves. What q should the firm choose so as to maximize its profit if the market price is p? How
Beta Laundry’s cost function is C(q) = 30 + 20q + q2.a. What quantity maximizes the firm’s profit if the market price is p? How much does it produce if p = 60? b. If the government imposes a specific tax of t = 2, what quantity maximizes its after-tax profit? Does it operate or shut down?
If the pre-tax cost function for John’s Shoe Repair is C(q) = 100 + 10q – q2 + 1/3 q3, and it faces a specific tax of t = 10, what is its profit-maximizing condition if the market price is p? Can you solve for a single, profit- maximizing q in terms of p?
If a specific subsidy (negative tax) of s is given to only one competitive firm, how should that firm change its output level to maximize its profit, and how does its maximum profit change? Use a graph to illustrate your answer.
Fierce storms in October 2004 caused TomatoFest Organic Heirlooms Farm to end its tomato harvest two weeks early. According to Gary Ibsen, a partner in this small business (Carolyn Said, “Tomatoes in Trouble,” San Francisco Chronicle, October 29, 2004, C1, C2), TomatoFest lost about 20,000
The Internet is affecting holiday shipping. In years past, the busiest shipping period was Thanksgiving week. Now as people have become comfortable with e- commerce, they purchase later in the year and are more likely to have gifts shipped (rather than purchasing locally). FedEx, along with Amazon
What is the effect on the short-run equilibrium of a specific subsidy of s per unit that is given to all n firms in a market?
As of 2013, customers at California grocery and drug stores must pay an extra 10¢ for every paper bag that the store provides (the store keeps this fee). Does such a charge affect the marginal cost of any particular good? If so, by how much? Is this fee likely to affect the overall amount that
What is the short-run and long-run effect on firm and market equilibrium of the U. S. law requiring a firm to give its workers six months’ notice before it can shut down its plant?
In late 2004 and early 2005, the price of raw coffee beans jumped as much as 50% from the previous year. In response, the price of roasted coffee rose about 14%. Similarly, in 2012, the price of raw beans fell by a third, yet the price of roasted coffee fell by only a few percentage points. Why did
The “Upward-Sloping Long-Run Supply Curve for Cotton” Mini-Case shows a supply curve for cotton. Discuss the equilibrium if the world demand curve crosses this supply curve in either (a) a flat section labeled Brazil or (b) the following vertical section. What do cotton farms in the United
Chinese art factories are flooding the world’s generic art market (Keith Bradsher, “Own Original Chinese Copies of Real Western Art!” New York Times, July 15, 2005). The value of bulk shipments of Chinese paintings to the United States nearly tripled from slightly over $ 10 million in 1996 to
The 2010 oil spill in the Gulf of Mexico caused the oil firm BP and the U. S. government to greatly increase purchases of boat services, various oil-absorbing materials, and other goods and services to minimize damage from the spill. Use side-by-side firm and market diagrams to show the effects
In 2009, the voters of Oakland, California, passed a measure to tax medical cannabis (marijuana), effectively legalizing it. In 2010, the City Council adopted regulations permitting industrial-scale marijuana farms with no size limits but requiring each to pay a $ 211,000 per year fee. 21 One
For a firm, how does the concept of producer surplus differ from that of profit if it has no fixed costs?
Suppose that the demand curve for wheat is Q = 100 – 10p and the supply curve is Q = 10p. The government imposes a price ceiling of p = 3. a. Describe how the equilibrium changes.b. What effect does this price ceiling have on consumer surplus, producer surplus, and deadweight loss?
Using a graph similar to figure, show that increasing output beyond the competitive level decreases total surplus because the cost of producing this extra output exceeds the value consumers place on it.
Use an indifference curve (Chapter) diagram (gift goods on one axis and all other goods on the other) to illustrate that a consumer is better off receiving cash rather than a gift. Relate your analysis to the Mini- Case “The Deadweight Loss of Christmas Presents.”
The government sets a minimum wage above the current equilibrium wage. What effect does the minimum wage have on the market equilibrium? What are its effects on consumer surplus, producer surplus, and total surplus? Who are the consumers and who are the producers?
The North American Free Trade Agreement provides for two- way, long- haul trucking across the U. S.-Mexican border. U. S. truckers have objected, arguing that the Mexican trucks don’t have to meet the same environmental and safety standards as U. S. trucks. They are concerned that the combination
In the Managerial Solution, would it make a difference to the analysis whether the lump-sum costs such as registration fees are collected annually or only once when the firm starts operation? How would each of these franchise taxes affect the firm’s long-run supply curve? Explain your answer.
Give an answer to the Managerial Problem for the short run rather than for the long run.
In a perfectly competitive market, all firms are identical there is free entry and exit, and an unlimited number of potential entrants. Now, the government starts collecting a specific tax t. What is the effect on the long-run equilibrium market quantity, market price, and the quantity for an
If the inverse demand function is p = 300 – 3Q, what is the marginal revenue function? Draw the demand and marginal revenue curves. At what quantities do the demand and marginal revenue lines hit the quantity axis?
If the inverse demand curve a monopoly faces is p = 10Q–0.5, what is the firm’s marginal revenue curve?
If the inverse demand function is p = 500 – 10Q, what is the elasticity of demand and revenue at Q = 10?
For the monopoly in figure at what quantity is its revenue maximized? Why is revenue maximized at a larger quantity than profit? Modify panel b of figure to show the revenue curve.
Using a graph, show under what condition the monopoly operates—does not shut down—in the long run. Discuss your result in terms of the demand curve and the average cost curve at the profit-maximizing quantity.
Why might a monopoly operate in any part (downward sloping, flat, upward sloping) of its long-run average cost curve, but a competitive firm will operate only at the bottom or in the upward-sloping section?
AT& T Inc., the large U. S. phone company and the one- time monopoly, left the payphone business at the beginning of 2009 because people were switching to wireless phones. U.S. consumers owning cellphones reached 80% by 2007 and 86% by 2012 according to the Pew Research Center. Consequently,
Show that after a shift in the demand curve, a monopoly’s price may remain constant but its output may rise.
Does it affect a monopoly’s profit if it chooses price or quantity (assuming it chooses them optimally)? Why can’t a monopoly choose both price and quantity?
The inverse demand function a monopoly faces is p = 100 – Q. The firm’s cost curve is C(Q) = 10 + 5Q. What is the profit- maximizing solution? How does your answer change if C(Q) = 100 + 5Q?
The inverse demand function a monopoly faces is p = 10Q–0.5. The firm’s cost curve is C(Q) = 5Q. What is the profit-maximizing solution?
Why is the ratio of the monopoly’s price to its marginal cost, p/MC, larger if the demand curve is less elastic at the optimum quantity? Can the demand curve be inelastic at that quantity?
When will a monopoly set its price equal to its marginal cost?
At the profit-maximizing quantity in figure, what is the elasticity of demand? What is the Lerner Index?
Using the information in Q&A 9.2, calculate the elasticity of demand faced by Apple at the profit maximizing price and quantity using the inverse demand function.
When the iPod was introduced, Apple’s constant marginal cost of producing its top-of-the-line iPod was $ 200 (iSuppli), its fixed cost was approximately $ 736 million, and we estimate that its inverse demand function was p = 600 – 25Q, where Q is units measured in millions. What was Apple’s
A monopoly has a constant marginal cost of production of $ 1 per unit and a fixed cost of $ 10. Draw the firm’s MC, AVC, and AC curves. Add a downward- sloping demand curve, and show the profit- maximizing quantity and price. Indicate the profit as an area on your diagram. Show the deadweight
A monopoly has an inverse demand function given by p = 120 – Q and a constant marginal cost of 10. Calculate the deadweight loss if the monopoly charges the profit-maximizing price.
What is the effect of a lump-sum tax (which is like an additional fixed cost) on a monopoly?
If the inverse demand function is p = 120 – Q and the marginal cost is constant at 10, how does charging the monopoly a specific tax of t = 10 per unit affect price and quantity and the welfare of consumers, the monopoly, and society (where society’s welfare includes the tax revenue)? What is
Show mathematically that a monopoly may raise the price to consumers by more than a specific tax imposed on it.
Can a firm operating in the upward- sloping portion of its average cost curve be a natural monopoly? Explain.
Once the copyright runs out on a book or music, it can legally be placed on the Internet for anyone to download. In 1998 the U.S. Congress extended the copyright law to 95 years after the original publication. But the copyright holds for only 50 years in Australia and 70 years in the European
In the “Botox” Mini- Case, consumer surplus, triangle A, equals the deadweight loss, triangle C. Show that this equality is a result of the linear demand and constant marginal cost assumptions.
Based on the information in the “Botox” Mini- Case, what would happen to the equilibrium price and quantity if the government had set a price ceiling of $ 200 per vial of Botox? What welfare effects would such a policy have?
Using a graph, explain why a firm might not want to spend money on advertising, even if such an expenditure would shift the firm’s demand curve to the right.
Showing 8100 - 8200
of 28054
First
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
Last
Step by Step Answers
Get 50% OFF
Claim Now
