Economics Of Strategy 6th Edition David Besanko, David Dranove, Scott Schaefer, Mark Shanley - Solutions

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10. Assume De Beers is the sole producer of diamonds.When it wants to sell more diamonds, it must lower its price in order to induce shoppers to buy more.Furthermore, each additional diamond that is produced costs more than the previous one due to the difficulty of mining for diamonds. De Beers’s
9. Patty delivers pizza using her own car, and she is paid according to the number of pizzas she delivers. The accompanying table shows Patty’s total benefit and total cost when she works a specific number of hours.Quantity of hours worked Total benefit Total cost 0 $0 $0 1 30 10 2 55 21 3 75 34
8. The Centers for Disease Control and Prevention (CDC)recommended against vaccinating the whole population against the smallpox virus because the vaccination has undesirable, and sometimes fatal, side effects.Suppose the accompanying table gives the data that are available about the effects of a
7. Georgia and Lauren are economics students who go to a karate class together. Both have to choose how many classes to go to per week. Each class costs $20.The accompanying table shows Georgia’s and Lauren’s estimates of the marginal benefit that each of them gets from each class per
6. You are the manager of a gym, and you have to decide how many customers to admit each hour. Assume that each customer stays exactly one hour. Customers are costly to admit because they inflict wear and tear on the exercise equipment. Moreover, each additional customer generates more wear and
5. Amy, Bill, and Carla all mow lawns for money. Each of them operates a different lawn mower. The accompanying table shows the total cost to Amy, Bill, and Carla of mowing lawns.Quantity of lawns mowed Amy’s total cost Bill’s total cost Carla’s total cost 0 $0 $0 $0 1 20 10 2 2 35 20 7 3 45
10. The accompanying diagram illustrates the U.S. domestic demand curve and domestic supply curve for beef
7. The accompanying table indicates the U.S. domestic demand schedule and domestic supply schedule for commercial jet airplanes. Suppose that the world price of a commercial jet airplane is $100 million.Price of jet(millions)Quantity of jets demanded Quantity of jets supplied$120 100 1,000 110 150
3. The U.S. Census Bureau keeps statistics on U.S. imports and exports on its website. The following steps will take you to the foreign trade statistics. Use them to answer the questions below.i. Go to the U.S. Census Bureau’s website at www.census.gov ii. Under the heading “Topics” select
8. Consider the original market for pizza in Collegetown, illustrated in the accompanying table. Collegetown officials decide to impose an excise tax on pizza of $4 per pizza.Price of pizza Quantity of pizza demanded Quantity of pizza supplied$10 0 6 9 1 5 8 2 4 7 3 3 6 4 2 5 5 1 4 6 0 3 7 0 2 8 0
7. The accompanying diagram shows the market for cigarettes. The current equilibrium price per pack is $4, and every day 40 million packs of cigarettes are sold. In order to recover some of the health care costs associated with smoking, the government imposes a tax of $2 per pack. This will raise
5. In the United States, each state government can impose its own excise tax on the sale of cigarettes. Suppose that in the state of North Texarkana, the state government imposes a tax of $2.00 per pack sold within the state.In contrast, the neighboring state of South Texarkana imposes no excise
3. In 1990, the United States began to levy a tax on sales of luxury cars. For simplicity, assume that the tax was an excise tax of $6,000 per car. The accompanying figure shows hypothetical demand and supply curves for luxury cars.0 4020 60 80 100 120 140$56 55 54 53 52 51 50 49 48 47 Price of
1. The United States imposes an excise tax on the sale of domestic airline tickets. Let’s assume that in 2013 the total excise tax was $6.10 per airline ticket (consisting of the $3.60 flight segment tax plus the $2.50 September 11 fee). According to data from the Bureau of Transportation
3. How did Amazon’s tax strategy distort its business behavior? What measures would eliminate these distortions?
2. Suppose sales tax is collected on all online book sales. From the evidence in this case, what do you think is the incidence of the tax between seller and buyer? What does this imply about the elasticity of supply of books by book retailers? (Hint: Compare the pre-tax prices of the book.)
1. What effect do you think the difference in state sales tax collection has on Amazon’s sales versus BarnesandNoble.com’s sales?
3. The accompanying table gives part of the supply schedule for personal computers in the United States.Price of computer Quantity of computers supplied$1,100 12,000 900 8,000a. Calculate the price elasticity of supply when the price increases from $900 to $1,100 using the midpoint method. Is it
2. In the United States, 2013 was a bad year for growing wheat. And as wheat supply decreased, the price of wheat rose dramatically, leading to a lower quantity demanded (a movement along the demand curve). The accompanying table describes what happened to prices and the quantity of wheat
11. The accompanying diagram shows data from the U.S.Bureau of Labor Statistics on the average price of an airline ticket in the United States from 1975 until 1985, adjusted to eliminate the effect of inflation (the general increase in the prices of all goods over time). In 1978, the United States
9. In Maine, you must have a license to harvest lobster commercially; these licenses are issued yearly. The state of Maine is concerned about the dwindling supplies of lobsters found off its coast. The state fishery department has decided to place a yearly quota of 80,000 pounds of lobsters
7. For the last 80 years the U.S. government has used price supports to provide income assistance to American farmers. To implement these price supports, at times the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target
6. In many European countries high minimum wages have led to high levels of unemployment and underemployment, and a two-tier labor system. In the formal labor market, workers have good jobs that pay at least the minimum wage. In the informal, or black market for labor, workers have poor jobs and
3. The U.S. Department of Agriculture (USDA) administers the price floor for butter, which the 2008 Farm Bill set at $1.05 per pound. At that price, according to data from the USDA, the quantity of butter supplied in 2010 was 1.7 billion pounds, and the quantity demanded was 1.6 billion pounds. To
3. Predict the effect on Medallion Financial’s business if New York City eliminates restrictions on the number of taxis. That is, if the quota is removed.
2. What will be the effect on Medallion Financial if New York companies resume widespread use of limousine services for their employees? What is the economic motivation that prompts companies to offer this perk to their employees? (Note that it is very difficult and expensive to own a personal car
1. How does Medallion Financial benefit from the restriction on the number of New York taxi medallions?
1. Suppose that the supply and demand for taxi rides is given by Figure 5-8 but the quota is set at 6 million rides instead of 8 million. Find the following and indicate them on Figure 5-8.a. The price of a rideb. The quota rentc. The deadweight lossd. Suppose the quota limit on taxi rides is
1. The state legislature mandates a price floor for gasoline of PF per gallon. Assess the following statements and illustrate your answer using the figure provided.a. Proponents of the law claim it will increase the income of gas station owners. Opponents claim it will hurt gas station owners
10. In 2010, a New York district judge ruled in a copyright infringement lawsuit against the popular filesharing website LimeWire and in favor of the 13 major record companies that had brought the lawsuit. The record companies, including Sony, Virgin, and Warner Brothers, had alleged that the
9. The accompanying diagram illustrates a taxi driver’s individual supply curve (assume that each taxi ride is the same distance).80 Price of taxi ride Quantity of taxi rides 40 S0$8 4a. Suppose the city sets the price of taxi rides at $4 per ride, and at $4 the taxi driver is able to sell as
8. You are the manager of Fun World, a small amusement park. The accompanying diagram shows the demand curve of a typical customer at Fun World.
7. On Thursday nights, a local restaurant has a pasta special.Ari likes the restaurant’s pasta, and his willingness to pay for each serving is shown in the accompanying table.Quantity of pasta(servings)Willingness to pay for pasta (per serving)1 $10 2 8 3 6 4 4 5 2 6 0a. If the price of a serving
6. The accompanying table shows the supply and demand schedules for used copies of the third edition of this textbook. The supply schedule is derived from offers at Amazon.com. The demand schedule is hypothetical.Price of book Quantity of books demanded Quantity of books supplied$55 50 0 60 35 1 65
5. Assume that due to an increase in demand, the average domestic airline fare increased from $319.85 in the fourth quarter of 2013 to $328.12 in the first quarter of 2014, an increase of $8.27. The number of passenger tickets sold in the fourth quarter of 2013 was 151.4 million. Over the same
3. Draw a diagram to show the effect of resellers on the allocation of consumer surplus and producer surplus in the market for concert tickets. What are the implications of the internet for all such exchanges?
2. Explain how the rise of the internet has disrupted this exchange.
1. Use the concepts of consumer surplus and producer surplus to analyze the exchange between The Boss and his fans. Draw a diagram to illustrate.
18. Draw the appropriate curve in each of the following cases. Is it like or unlike the curves you have seen so far? Explain.a. The demand for cardiac bypass surgery, given that the government pays the full cost for any patientb. The demand for elective cosmetic plastic surgery, given that the
13. Demand twisters: Sketch and explain the demand relationship in each of the following statements.a. I would never buy a Miley Cyrus album! You couldn’t even give me one for nothing.b. I generally buy a bit more coffee as the price falls.But once the price falls to $2 per pound, I’ll buy out
11. Fans of rock and rock stars often bemoan the high price of concert tickets. One superstar has argued that it isn’t worth hundreds, even thousands, of dollars to hear him and his band play. Let’s assume this star sold out arenas around the country at an average ticket price of $75.a. How
6. Suppose that the supply schedule of Maine lobsters is as follows:Price of lobster(per pound)Quantity of lobster supplied (pounds)$25 800 20 700 15 600 10 500 5 400 Suppose that Maine lobsters can be sold only in the United States. The U.S. demand schedule for Maine lobsters is as follows:Price
3. How does Uber’s surge pricing solve the problem described in the previous question? Assess Kalanick’s claim that the price is set to leave as few people possible without a ride(p. 18)
2. What accounts for the fact that during good weather there are typically enough taxis for everyone who wants one, but during snowstorms there typically aren’t enough?(p. 18)
1. Before Uber, how were prices set in the market for rides in New York City?Was it a competitive market?(p. 18)
2. When a new, faster computer chip is introduced, demand for computers using the older, slower chips decreases. Simultaneously, computer makers increase their production of computers containing the old chips in order to clear out their stocks of old chips.Draw two diagrams of the market for
9. This table illustrates annual salaries and income tax owed by five individuals. Despite receiving different and owing salaries and owe different amounts of income tax, these five individuals are otherwise identical.(p. 18)Name Annual salary Annual income tax owed Susan $22,000 $3,304 Eduardo
6. The base of a right triangle is 10, and its area is 20.What is the height of this right triangle?(p. 18)
5. For each of the accompanying diagrams, calculate the area of the shaded right triangle.(p. 18)
3. In the accompanying figures, the numbers on the axes have been lost. All you know is that the units shown on the vertical axis are the same as the units on the horizontal axis.y xy xPanel (a) Panel (b)a. In panel (a), what is the slope of the line? Show that the slope is constant along the
15. Assess the following statement: “If economists just had enough data, they could solve all policy questions in a way that maximizes the social good. There would be no need for divisive political debates, such as whether the government should provide free medical care for all.”(p. 18)
13. Economists who work for the government are often called on to make policy recommendations. Why do you think it is important for the public to be able to differentiate normative statements from positive statements in these recommendations?(p. 18)
6. You are in charge of allocating residents to your dormitory’s baseball and basketball teams. You are down to the last four people, two of whom must be allocated to baseball and two to basketball. The accompanying table gives each person’s batting average and freethrow average.Name Batting
1. Two important industries on the island of Bermuda are fishing and tourism. According to data from the Food and Agriculture Organization of the United Nations and the Bermuda Department of Statistics, in 2009 the 306 registered fishermen in Bermuda caught 387 metric tons of marine fish. And the
3. Before lean manufacturing innovations, Japan mostly sold consumer electronics to the United States. How did lean manufacturing innovations alter Japan’s comparative advantage vis-à-vis the United States?4. Predict how the shift in the location of Toyota’s production from Japan to the United
2. Explain how lean manufacturing improves the economy’s efficiency in allocation.(p. 18)
1. What is the opportunity cost associated with having a worker wander across the factory floor from task to task or in search of tools and parts?(p. 18)
3. Using the numbers from Table 2-1, explain why the United States and Brazil are willing to engage in a trade of 10 large jets for 15 small jets.(p. 18)
8. Which of the following situations describes an equilibrium? Which does not? If the situation does not describe an equilibrium, what would an equilibrium look like?a. Many people regularly commute from the suburbs to downtown Pleasantville. Due to traffic congestion, the trip takes 30 minutes
How might a favorable location in the interpersonal networks within a firm help an individual acquire and maintain additional bases of power?
Power often accrues to individuals who are very effective in their jobs or to firms that enjoy sustained high performance. If this is so, how is power different from basic competence, efficiency, or performance?
When might it not be reasonable to remedy a power differential with a critical buyer or supplier?
How does the resource-dependence view of power differ from the marketimperfections perspective of transactions-costs economics?
The Lincoln Electric Company is a longtime maker of welding equipment in Cleveland, Ohio, whose industry performance has been legendary. Its operations have focused around its well-known piece-rate incentive system, which permits it to gain significantly greater utilization of its capital assets
While most managers might agree that firms should organize appropriately for their environmental conditions, they might easily differ on what environmental conditions were facing a firm and what an appropriate response to those conditions might entail.Explain the role of the manager in developing a
Many of the most pressing organizational issues attracting public attention today seem to concern government agencies, especially those with responsibilities for preventing man-made disasters and attacks or responding to natural ones, such as hurricanes. How do the organizational design issues
The “#1 or #2; Fix, Sell, or Close” rule was one of the most memorable aspects of Jack Welch’s corporate strategy at GE. (Business units needed to achieve a #1 or#2 market share; if not, they had to fix, sell, or close the unit.) In the 1990s, however, this rule was changed to focus on
While Internet entrepreneurs worked hard to get their venture to the point of a successful initial public offering (IPO), many discovered that their organizational issues changed and became more daunting after the IPO than before it, when they were just working to accommodate rapid growth. Explain
Is is possible to organize too much or too little to meet the needs of the environment?This would be a case of strategic misfit. How would you know if a misfit has occurred? Think of an example of misfit caused by an inappropriate organization design. Explain how a firm’s structure could
It is sometimes argued that a matrix organization can serve as a mechanism for achieving strategic fit—the achievements of synergies across related business units resulting in a combined performance that is greater than units could achieve if they operated independently. Explain how a matrix
Matrix organizations first sprang up in businesses that worked on scientific and engineering projects for narrow customer groups. Examples include Fluor, which built oil refineries in Saudi Arabia, and TRW, which supplied aerospace equipment to NASA. What do you suppose the dimensions of the matrix
In the 1980s, Sears acquired several financial services firms, including Allstate Insurance and Dean Witter Brokerage Services. Sears kept these businesses as largely autonomous divisions. By 1994, the strategy had failed and Sears had divested all of its financial services holdings. Bearing in
What types of structures would a firm consider if it was greatly expanding its global operations? What types of organizing problems would it be most likely to encounter?
Consider a firm whose competitive advantage is built almost entirely on its ability to achieve economies of scale in producing small electric motors that are used by the firm to make hair dryers, fans, vacuum cleaners, and food processors.Should this firm be organized on a multidivisional basis by
A team of six individuals must fold, stuff, seal, and stamp 250 preaddressed envelopes.Offer some suggestions for organizing this team. Would your suggestions differ if the team was responsible for processing 2,500 envelopes? For assembling 250 personal computers? Why would you change your
Oil companies such as British Petroleum and Royal Dutch Shell sell gasoline through their own branded gas stations. In some cases, these companies own their gas stations; in others, the stations are owned by local franchises. How might the following factors affect the choice of corporate versus
Giganticorp, a large conglomerate, has just acquired Nimble, Inc., a small manufacturing concern. Putting yourself in the shoes of Nimble’s employees, what concerns do you have about the implicit incentive contracts that governed your relationship with Nimble before the merger? Now place yourself
Consider a potential employee who values wages but also values the opportunity to pursue non–work-related activities. (You may think of these activities as relating to family obligations, such as child care.) Suppose that other jobs available to this employee pay $100 per day but require him to
Suppose that Minot Farm Equipment Corporation employs two salespeople.Each covers an exclusive territory; one is assigned to North Dakota and the other to South Dakota. These two neighboring states have similar agricultural economies and are affected by the same weather patterns. Durham Tractor
While in principle it is feasible for business schools to write explicit pay-for performance contracts with professors, this is rarely done. Identify the drawbacks of the following performance measures for this job:• Number of research articles published• Students’ ratings of professors’
Firms often use quotas as part of compensation contracts for salespeople. A quotabased contract may stipulate, for example, that the salesperson will receive a$10,000 bonus if yearly sales are $1 million or more, and no bonus otherwise.Identify actions a firm probably does not want pursued that the
Regulated firms, such as electric utilities, typically have limited discretion over the prices they charge. Regulators set prices to guarantee a fixed return to the firm’s owners after gathering information about operating costs. Studies of executive pay practices have consistently shown that the
Suppose that a firm offers a divisional manager a linear pay-for-performance contract based on the revenues of the division the manager leads. The manager’s pay includes a fixed yearly salary F and a fraction of the division’s revenue that is paid to the manager. Suppose that the demand for
In the United States, lawyers in negligence cases are usually paid a contingency fee equal to roughly 30 percent of the total award. Lawyers in other types of cases are often paid on an hourly basis. Discuss the merits and drawbacks of each from the perspective of the client (i.e., the principal).
Suppose that you were granted a “risky job” of the type examined in this chapter.The job pays $40,000 with probability 1/2 and $160,000 with probability ½.What is your certainty equivalent for this risky payoff? To answer this question, compare this risky job to a safe job that pays $100,000
In the United States, lawyers in negligence cases are usually paid a contingency fee equal to roughly 30 percent of the total award. Lawyers in other types of cases are often paid on an hourly basis. Discuss the merits and drawbacks of each from the perspective of the client (i.e., the principal).
Using your own experience, if possible, identify three types of hidden information that could affect an agency relationship. Identify three forms of hidden action as well.
The present value of the stream of monopoly profits from this design is thought to be $500 million. Enginola (which is currently in a completely different segment of the microprocessor market from this one) and IQ are contemplating spending money to develop a superior design that will make the 666
IQ, Inc., currently monopolizes the market for a certain type of microprocessor, the
“Industrial or antitrust policies that result in the creation of domestic monopolies rarely result in global competitive advantage.” Comment.
What are a firm’s dynamic capabilities? To what extent can managers create or“manage into existence” a firm’s dynamic capabilities?
Is patent racing a zero-sum game? A negative sum-game? Explain.
Is the extent of creative destruction likely to differ across industries? Can the risk of creative destruction be incorporated into a five-forces analysis of an industry?
Consider an industry in which firms can expect to sell 1,000 units annually at a market price of P. Before firms enter, they do not know their production costs with certainty. Instead, they believe that unit costs can be $2, $4, $6, or $8 with equal probability. Annualized sunk production costs are
Two incompatible high-resolution audio formats, Super Audio CD (SACD) and DVD Audio (DVDA), were introduced in 2000. Both offered surround-sound music at a quality that approaches the original studio master recordings from which they are made. Both formats could be added to new DVD players for an
In light of the winner’s curse, must winning bidders in auctions necessarily “lose”in the sense of paying more than the item is worth? What steps can bidders take to prosper in auctions?
Which of the following circumstances are likely to create early-mover advantages?(a) Maxwell House introduces the first freeze-dried coffee.(b) A consortium of U.S. firms introduce the first high-definition television.(c) SmithKline introduces Tagamet, the first effective medical treatment for
Mercury is a hypothetical store that sells athletic shoes, particularly shoes for runners.Mercury is distinctive in the training of its sales staff. The store has a variety of diagnostic tools, including weight distribution analysis and slow-motion replay, and the staff are trained to use those
Provide an example of a firm that has cospecialized assets. Has the firm prospered from them? Why or why not?
Coke and Pepsi have sustained their market dominance for nearly a century. General Motors and Ford were hard hit by competition and never fully recovered.What is different about the product/market situations in these two cases that affects sustainability?

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Economics Of Strategy 6th Edition David Besanko, David Dranove, Scott Schaefer, Mark Shanley - Solutions

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