Questions and Answers of Managerial Economics

Other things remaining the same, what would happen to the supply of a particular commodity if the following changes occur?a. The price of the commodity decreases.b. A technological breakthrough
The following general supply function shows the quantity of good X that producers offer for sale (Qs):Qs = 19 + 20Ps - 10PI + 6T - 32Pr - 20Pe + 5Fwhere Px is the price of X, PI is the price of
Suppose the supply curve for good X passes through the point P = $25, Qs = 500. Give two interpretations of this point on the supply curve.
Consider the general supply function:Qs = 60 + 5P - 12PI + 10Fwhere Qs = quantity supplied, P = price of the commodity, PI = price of a key input in the production process, and F = number of firms
What happens to demand when the following changes occur?a. The price of the commodity falls.b. Income increases and the commodity is normal.c. Income increases and the commodity is inferior.d. The
Using a graph, explain carefully the difference between a movement along a demand curve and a shift in the demand curve.
Recall that the general demand function for the demand curves in Figure 2.2 is Qd = 3,200 - 10P + 0.05M + 24PR Derive the demand function for D2 in Figure 2.2. Recall that for D2 income is $52,000
The demand curve for good X passes through the point P = $2 and Qd = 35. Give two interpretations of this point on the demand curve.
Consider the general demand function:Qd = 8,000 - 16P + 0.75M + 30PRa. Derive the equation for the demand function when M = $30,000 and PR = $50.b. Interpret the intercept and slope parameters of the
The general demand function for good A isQd = 600 - 4PA - 0.03M - 12PB + 15T + 6PE + 1.5Nwhere Qd = quantity demanded of good A each month, PA = price of good A, M = average household
Fill in the blanks:a. Managers will maximize the values of firms by making decisions that maximize ______________in every single time period, so long as cost and revenue conditions in each period are
Over the next three years, a firm is expected to earn economic profits of $120,000 in the first year, $140,000 in the second year, and $100,000 in the third year. After the end of the third year, the
During a year of operation, a firm collects $175,000 in revenue and spends $80,000 on raw materials, labor expense, utilities, and rent. The owners of the firm have provided $500,000 of their own
For each one of the costs below, explain whether the resource cost is explicit or implicit, and give the annual opportunity cost for each one. Assume the owner of the business can invest money and
Suppose you were to estimate a statistical model explaining the relation between the degree of ownership concentration and the following variables: (1) the degree of regulation in the industry, (2)
Go to the SEC EDGAR Web site (www.sec.gov/cgi-bin/srch-edgar). Search for the recent SEC filings of a publicly traded company (such as Walmart Stores Inc.). Review the firm's most recent proxy
Bob's Manufacturing Company has altered the determinants of pay raises for U.S. employees. Whereas in the past pay increases for managers, professionals, and hourly workers had been automatic,
Discuss some of the costs and benefits of 360-degree evaluation systems.
By the year 2000, General Motors had decentralized primary decision rights for designing cars to vehicle line managers. In earlier years, General Motors had a centralized corporate design group. This
Studies of Information Technology (IT) services consistently show that IT services are organized differently in large versus small firms. Larger firms often locate independent IT centers throughout
a. Complete the below table.b. Graph TC, TFC, TVC, MC, AC, AFC, and AVC against Q.
Jan van der Schmidt was the founder of a successful chain of restaurants located throughout Europe. He died unexpectedly at the age of 55. Jan was sole owner of the company's common stock and was
The Hewl-Pact Company produces a popular printer than prints over 100 pages per minute. It recently announced that it was introducing a lower priced model of the printer that can print 30 pages per
Suppose in Table 7.2 (Product Bundling) that the professional user values Microsoft Trip Planner at $30 rather than $20. Keep all other valuations the same. Are there still obvious advantages from
What is a Nash equilibrium? Explain why a joint confession is the Nash equilibrium in the prisoners? dilemma. 2 months 18 months O months 2 months Bea-Confession Bea-No confession O months 12 months
How will each of the following affect the position of the demand curve for DVD players?a. An increase in the price of DVD movies.b. A decrease in the price of DVD players.c. An increase in per capita
Suppose that the demand curve for wheat is P = 100 - Q and the supply curve is P = Q.Find the equilibrium price and quantity. Calculate consumer and producer surplus. Suppose that the government
Suppose that the Swiss government wants to encourage good grooming by Thun citizens. To “encourage” better grooming it places a 15 CHF price cap on haircuts (no company can charge more than 15
Your firm operates in a competitive industry. All firms in the industry have experienced an increase in the cost of raw materials. Do you think that the firms in your industry will be able to pass
In 1990, Congress adopted a new tax on luxury goods, such as yachts, private airplanes, and jewelry. Assume this was charged as a per unit tax to the consumer. Was this a good way to accomplish the
Suppose the demand function for a product is P = 100 - (1/6)Q + 2I, where I is income and the supply function is P = (1/3)Q. Currently I = 25.a. Find the current equilibrium price and quantity.b.
Input cost increases have caused the industry supply curve for golf balls to shift. The equilibrium quantity changed, but the price did not. Can you say anything about the elasticity of either the
Suppose that the demand function for wheat is QD = 1.1 - .25P + .1I, where P = the price of wheat and I = per capita income. The supply function for wheat is QS 4.3 + .5P - .04Po, where Po =
Bill and Chris produce balls and bats. In one hour, Bill can produce two bats or four balls, while Chris can produce one bat or three balls. They each work 10 hours a day.a. Which of the following,
The school is having a happy hour on Friday. If you go, you will get two free drink tickets and snacks, for which you would normally pay $15. However, you will have to pay $10 for the cab fare home.
You are trying to decide whether to fly or drive from Rochester to Boston during your summer visit. The trip is approximately 400 miles. You can purchase a round-trip nonstop flight for $230. The
In one hour, John can assemble either 20 telephones or 10 answering machines. It takes Sally two hours to assemble either 20 telephones or 10 answering machines. Does either person have an absolute
An entrepreneur quits his job as a banker and invests $100,000 of his savings in a new business venture that he will manage. Discuss the two most obvious opportunity costs that he will incur from
Michael is a fan of the Rhinos—the local professional soccer team. At the beginning of the season, he purchased nonrefundable season tickets to their 10 home games for a total of $100. Michael
Russell and Joe have hired Maria to help cook in their restaurant. Maria had previously owned her own breakfast business. Her speed in cooking was well-known. Russell and Joe have been surprised that
In an article about the financial problems of USA Today, Newsweek reported that the paper was losing about $20 million a year. A Wall Street analyst said that the paper should raise its price from 50
Brake repair and muffler repair require many tools and other capital equipment that can be classified as shared or common inputs.a. What are some of these shared or common inputs in muffler and brake
For the short-run cubic production function, show that increasing K̅ always results in an increase in the level of labor usage at which diminishing returns begin.
The Harley-Davidson motorcycle company, which had a copyright on the word “hog,” applied for exclusive rights to its engine sound. Why would a company want copyrights on two such mundane things?
Amtrak, a national passenger railroad heavily subsidized by taxpayers, operates at a huge loss every year. Recently, officials at Amtrak expressed confidence that they can turn things around by
The owners of the Tampa Bay Buccaneers have seen demand for season tickets decline steadily, probably because the team’s performance is ranked near the bottom of 32 teams in the National Football
In the 2000 U.S. presidential contest, Al Gore was advised by his strategists to wait for George W. Bush to announce his vice-presidential running mate before making his own decision on a running
Aztec Enterprises depends heavily on advertising to sell its products. Management at Aztec is allowed to spend $2 million monthly on advertising, but no more than this amount. Each month, Aztec
The price elasticity of demand for imported whiskey is estimated to be 20.20 over a wide interval of prices. The federal government decides to raise the import tariff on foreign whiskey, causing its
Some managers are known for their reliance on “practical” decision-making rules and processes, and they can be quite skeptical of decision rules that seem too theoretical to be useful in
You are considering the purchase of a piece of land that can be leased to the government for 100 years. The annual lease payment is $20,000 and the appropriate discount rate for your situation is 4
Explain why it would cost Rafael Nadal or Venus Williams more to leave the professional tennis tour and open a tennis shop than it would for the coach of a university tennis team to do so.
Rising jet fuel prices recently led most major U.S. airlines to raise fares by approximately 15 percent. Explain how this substantial increase in airfares would affect the following:a. The demand for
Appalachian Coal Mining believes that it can increase labor productivity and, therefore, net revenue by reducing air pollution in its mines. It estimates that the marginalcost function for reducing
Joy Land Toys, a toy manufacturer, is experiencing quality problems on its assembly line. The marketing division estimates that each defective toy that leaves the plant costs the firm $10, on
In his analysis of California€™s Proposition 103 (see Illustration 4.2), Benjamin Zycher notes that one of the most important provisions of this proposition is eliminating the practice by
Over the past decade, the federal government has taken significant steps to encourage the development of ethanol and other fuels made from plants as a partial replacement for gasoline. These actions
Nucor, the largest global steel joist and deck manufacturer and the biggest steel producer in the United States, had sales in 2013 of $19 billion. Under teambased production, each employee is
Insurance companies contract with independent agents to sell policies and provide ongoing services to customers. Ongoing client services tend to be more important in auto insurance companies than
Global Insurance is a disability insurance company. Traditionally, it has organized its corporate headquarters around functional specialties. After an application for an insurance policy arrives at
Interwest Healthcare is a nonprofit organization that owns 10 hospitals located in three western states. Cynthia Manzoni is Interwest’s CEO. Vijay Singh, Interwest’s CFO, and the administrators
You own a business that services trucks. A customer would like to rent a truck from you for one week, while you service his truck. You must decide whether or not to do this.You have an extra truck
Consumers have been able to purchase digital music and audiobooks over the Internet through Apple Computer's iTunes Music Store (Music Store) since April 2003. The Music Store is integrated with
Conventional wisdom holds that to succeed in electronic commerce, you have to get in early. But in late 1999, Walmart decided to challenge that most sacred of web rules. After several years of
You are a manager for a company that bottles and sells wine in two different countries. You charge the same price for a bottle of wine in both countries. Yet, your wine sales are much higher in one
Lauren Arbittier decides to bet $2,000 on number 35 of the roulette wheel in a Las Vegas casino. Almost immediately she starts to question her decision. Lauren normally is a risk avoider who hardly
You are a manager of a division of a company that is responsible for the final assembly of two computer products, modems and keyboards. You manage two employees, Julio and Chenyu, who each work 8
It is worth contemplating for a moment a very simple and commonplace instance of the action of the price system to see what precisely it accomplishes. Assume that somewhere in the world a new
You work as a stock analyst. You specialize in analyzing markets for “high-end” manufactured products. The President has recommended that Congress impose a tax of $20,000 on every person who
1. Suppose that you purchase a newly issued 10- year U.S. Treasury bond for $10,000. The bond has a promised interest rate of 5 percent ($250 every six months). The stated interest rate of 5 percent
The Board of Ursinus College in Pennsylvania raised its tuition and fees 17.6 percent to $23,460 in 2000. It subsequently received 200 more applications than the year before. The president of the
You work for a company in India that manufactures and exports batteries and other charge storage devices. You are the sales manager for a DCDC converter that is used to step up or step down the
Personal video recorders (PVRs) are digital video recorders used to record and replay television programs received from cable, satellite, or local broadcasts. But unlike VCRs, which they replace,
Proton Holdings Bhd is a national carmaker in Malaysia. In late 2007, the Malaysian government owned 43 percent of the company. The remaining stock of the company traded on public stock
Gina Picaretto is production manager at the Rich Manufacturing Company. Each year her unit buys up to 100,000 machine parts from Bhagat Incorporated. The contract specifies that Rich will pay Bhagat
The WSJ recently presented data suggesting that United Airlines was not covering its costs on flights from San Francisco to Washington D.C. The article quoted analysts saying that United should
You work for a drug manufacturing company that holds a patent on Hair Grow, the world's most effective drug for restoring hair. Your job is to analyze the pricing and investment decisions facing the
In the simple Cournot model, firms make their output choices simultaneously. In practice, firms sometimes make these kinds of decisions sequentially. Suppose that you manage one of the firms
You operate a small microbrewery in Germany. The demand curve for cases of your beer is P = 50 - .002Q. Your marginal cost for producing beer is 10 euros per case. Currently you are charging all
You are a pricing manager for a cell phone company. You have two types of customers with different demand curves for your service. The demand curves for an individual customer from each group for
For the last 10 years you have been working in the health food business. You have talked to many customers who have suggested a new restaurant concept. The restaurant would feature a variety of low
You have worked as an investment banker in New York and Hong Kong for the last five years. You are tired of living in populated cities and yearn for a more peaceful environment.The Wall Street
Cigarette manufacturers were among the first companies to advertise extensively on television. Older people today can still hum the heavily televised jingle, "Winston tastes good like a cigarette
You work for a company that is frequently involved in negotiations to acquire companies from their current owners. You have been invited to be a guest on the popular television game show Let's Make a
Aspartame is a low-calorie sweetener marketed by Monsanto under the name of NutraSweet. It was a major impetus to the rapid growth of Diet Coke and Diet Pepsi during the 1980s and 1990s. A scientist
eBay operates the world's largest online auction. In early 2008, eBay operated in 39 counties with 276 million registered users worldwide. The total value of all successfully closed items in 2007 was
You are the owner of a small restaurant chain in the Portland, Oregon, area. All five of your restaurants employ the same basic business concept and have similar building designs, menus, and service
In most restaurants, waiters receive a large portion of their compensation through tips from customers. Generally, the size of the tip is decided by the customer. However, many restaurants require a
Medford University is a research university with about 10,000 students. It has a good liberal arts undergraduate program, a top-rated medical school, and a fine law school. It employs about 12,000
Life insurance agents focus on selling policies. The company expects little follow-up in terms of providing ongoing customer service. In contrast, auto insurance agents often are expected to provide
The most visible and highly paid person in most corporations is the chief executive officer (CEO). CEO compensation is particularly important to firms for three reasons. First, the compensation
Bobby's Burgers is a large restaurant chain with nearly 10,000 units worldwide. It is experiencing incentive problems among its outlet managers. The managers are not working very hard and are letting
Parkleigh Pharmacy is a small department store in Rochester, NY, specializing in upscale, expensive personal accessories (e.g., sunglasses, beauty aids, leather goods) and home decorations (e.g.,
The willingness of firms to listen to the preferences of employees suggests that employees pay for their own fringe benefits. For instance, most companies would be willing to pay higher salaries if
You work in the human resource office of a major cruise line that offers cruises in various locations around the world (the Caribbean, the Mediterranean, Asia, etc.). The CEO of your company has
Bagby Copy Company is a worldwide producer of copy machines. It manufactures 10 different copiers, ranging from low-end desktop copiers that sell for a few hundred dollars to high-volume document
Jog PCS is a wireless telephone company. It sells cell phones to three customer groups: (1) business users, (2) high-volume individual users, and (3) low-volume individual users. Currently, the
Assume that a salesperson, Edwynn Phillips, has the following annual compensation package: C = $15,000 + 0.2(own sales) This compensation plan induces Ed to exert a given level of effort in selling.
Along with Mom and apple pie, teamwork has become a sacred cow to American businesses. Yet, one survey by Mercer Management found that only 13 percent of 179 teams received high ratings. "Somehow, we
Semco S.A. in São Paulo, Brazil, has 500 employees and manufactures capital goods. The employees elect their managers and evaluate them every six months. Managers rated poorly are transferred or

Showing 300 - 400 of 755