Question: 1. Suppose a demand function can be specified as QW= 400-3p, evaluate the point elasticity of demand when the price is $10. As a manager,

  • 1. Suppose a demand function can be specified as QW= 400-3p, evaluate the point elasticity of demand when the price is $10. As a manager, will you increase the price? Why? 
  • (b) Imagine that your competitors increase the price of this good, how will you respond to the price increase as a manager? Why? Section 2: Estimating Demand and Total Revenue 

  • Q2. (a) Use the following function: QW= 400-2p, to estimate the maximum total revenue. 
  • (b) Plot the average, marginal, and total revenue curves (see pp.60-61) and Homework1. 
  • (c) What is the maximum total revenue in monetary terms? 
  • (d) Suppose marginal cost is $5, what will be the profit-maximizing price? Remember to use the MC=MR rule and then solve for price 

  • Q3 Refer to the S&P data. Using S& P as your independent variable select two companies and run a regression for the two companies while suppressing the intercept term. 
  • (b) Interpret the results of your coefficients. 
  • (c) Suppose you have been entrusted with the responsibility to manage a large amount of money, what managerial decision will you make in terms of investing the money in either of the companies? Why?

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