2nd Assignment Managerial Economics XJTU

© All Rights Reserved

211 views

2nd Assignment Managerial Economics XJTU

© All Rights Reserved

- Cheat Sheet for Test 4 Updated
- STS Modern Times
- Chapter 2
- RVJ-Processed and Packed Curd for the Indian Market
- SPSS 19 Answers to Selected Exercises
- spss
- Logistic Regression a Primer
- One Factor Repeated Measures Design on SPSS_1
- JURNAL INTER OBSERVER VARIATION
- S2.Lab.repeated
- Annals of Botany
- Dairy Market to Grow by 13
- Course Text
- Stats
- 9712
- A577CD017017.pdf
- berat basah
- AlokKumar_DissertationFinal
- Assignment 3
- Time Series Properties of an Artificial Stock Market

You are on page 1of 10

SECOND ASSIGNMENT

3116999164

Managerial Economics

Chapter 3

Q4. Suppose the own price elasticity of demand for good X is _2, its

income elasticity is 3, its advertising elasticity is 4, and the cross-price

elasticity of demand between it and good Y is _6. Determine how much

the consumption of this good will change if:

a. The price of good X increases by 5 percent.

b. The price of good Y increases by 10 percent.

c. Advertising decreases by 2 percent.

d. Income falls by 3 percent.

Answer

Qx d

a. own price= =2 , then we can replace the price variation in the

Px

formula

Qx d

own price= =2 and finally, we can compute the variation in Qx.

5

d

%Q x =10

Qx d

b. cross price= =6 , then we can replace the price variation in the

Py

formula

Qx d

cross price= =6 and finally, we can compute the variation in Qx.

10

%Q dx =60

Qx d

c. Advertising= =4 , then we can replace the price variation in the

Ax

formula

Qx d

Advertising= =4 and finally, we can compute the variation in Qx.

2

%Q dx =8

Qx d

d. Income = =3 , then we can replace the price variation in the formula

M

Qx d

Income = =3 and finally, we can compute the variation in Qx.

3

%Q dx =9

Q8. Suppose the true inverse demand relation for good X is

^

P=a+ bQ +e , and you estimated the parameters to be = 10, b=2.5 ,

a^ =1 , and b^ =0.5 . Find the approximate 95 percent confidence

interval for the true values of a and b.

Answer

a a^ 2 a^ =[ 10 2 ] =[ 8 , 12 ]

b b^ 2 b^ =[ 1 1 ]= [ 0 , 2 ]

Q12. You are the manager of a firm that sells a leading brand of alkaline

batteries. A file named Q12.xls with data on the demand for your

product is available online at www.mhhe.com/baye7e. Specifically, the

file contains data on the natural logarithm of your quantity sold, price,

and the average income of consumers in various regions around the

world. Use this information to perform a log-linear regression, and then

determine the likely impact of a 3 percent decline in global income on

the overall demand for your product.

Answer

Regression Statistics

Multiple R 0.97

R Square 0.94

Adjusted R

Square 0.94

Standard Error 0.00

Observations 49.00

ANOVA

df SS MS F Significance F

Residual 46.00 0.00 0.00

Total 48.00 0.01

P-

Coefficients Standard Error t Stat value Lower 95% Upper 95%

If the income decline a 3%, the demand of the product will decrease .009% (3% x

-0.03).

Q16. You are a manager in charge of monitoring cash flow at a company

that makes photography equipment. Traditional photography

equipment comprises 80 percent of your revenues, which grow about 2

percent annually. You recently received a preliminary report that

suggests consumers take three times more digital photographs than

photos with traditional film, and that the cross-price elasticity of

demand between digital and disposable cameras is -0.2. In 2009, your

company earned about $400 million from sales of digital cameras and

about $600 million from sales of disposable cameras. If the own price

elasticity of demand for disposable cameras is -2.5, how will a 1 percent

decrease in the price of disposable cameras affect your overall

revenues from both disposable and digital camera sales?

Answer

Qx d

own price= =2.5 , in the same way we did in the question 4, we just

Px

replace the new variation we have in the price, to get the variation in Qx.

Qx d

own price= =2.5

1

in 2.5%. Now we must see the effects in the digital camera demand.

Qx d

cross price= =0.2

Py

Qx d

own price= =0.2

1

Qx=0.2 .

The formula to obtain the revenue is Price x Quantity and we know how much the

quantities for both kind of cameras have changed. So with this two data, we can

calculate the effect in the revenue.

Digital Camera

P1 Q 1( 1.002)=$ 400.8 millions because the price for digital cameras

hasnt changed, so we just need to change the quantity. So the final result

is that the revenue has increased in 800,000.

Disposable Camera

price and a different quantity, which we dont know, but we can calculate

the difference from the elasticity. Finally, when we multiply our new price

(1% cheaper) and or new quantity (2.5% larger), we have the new revenue

of $811.8 millions, that means an effect and difference of 11.8 millions

from the initial situation.

Q20. According to CNN, two dairy farmers challenged the legality of the

funding of the Got Milk? campaigns. They argued that the Got Milk?

campaigns do little to support milk from cows that are not injected with

hormones and other sustainable agriculture products, and therefore

violate their (and other farmers) First Amendment rights. The 3rd U.S.

Circuit Court of Appeals agreed and concluded that dairy farmers

cannot be required to pay to fund the advertising campaigns. One of

the obvious backlashes to the National Dairy Promotion and Research

Board is reduced funding for advertising campaigns. To assess the likely

impact on milk consumption, suppose that the National Dairy Promotion

and Research Board collected data on the number of gallons of milk

households consumed weekly (in millions), weekly price per gallon, and

weekly expenditures on milk advertising (in hundreds of dollars). These

data, in forms to estimate both a linear model and log-linear model, are

available online at www.mhhe.com/baye7e in a file named Q20.xls. Use

these data to perform two regressions: a linear regression and a log-

linear regression. Compare and contrast the regression output of the

two models. Comment on which model does a better job fitting the

data. Suppose that the weekly price of milk is $3.10 per gallon and the

National Dairy Promotion and Research Boards weekly advertising

expenditures falls 25 percent after the courts ruling to $100 (in

hundreds). Use the best-fitting regression model to estimate the weekly

quantity of milk consumed after the courts ruling.

Chapter 5

C(Q) = 50 + 25Q + 30Q2 + 5Q3

a. The fixed cost of producing 10 units of output.

b. The variable cost of producing 10 units of output.

c. The total cost of producing 10 units of output.

d. The average fixed cost of producing 10 units of output.

e. The average variable cost of producing 10 units of output.

f. The average total cost of producing 10 units of output.

g. The marginal cost when Q = 10.

Answer

a. The fixed costs dont depends upon the quantity, for any value of Q in the

function, the fixed cost is equal to 50.

CV ( Q )=8,250

C ( Q )=8,300

FC 50

d. AFC = = =5.

Q 10

VC 8,250

e. AVC = = =825

Q 10

C 8,300

f. AC = = =830

Q 10

g. To get the marginal cost function, we must derivate the total cost function in

base of Q.

dC(Q)

=25+6 Q+15 Q2

dQ

Now we can replace Q=10 to get the marginal cost of producing 10 units.

MC=25+6 ( 10 ) +15(10)2=1,585

Q8. Explain the difference between fixed costs, sunk costs, and variable

costs. Provide an example that illustrates that these costs are, in

general, different.

Answer

The sunk costs, are the costs that have been paid and cannot be recovered. The

fixed costs, are the one a company must pay anyway even if they decide to not

produce, and in the other hand, the variable costs its value will depend on the

units that the company decide to produce. To give an example, if a car

manufacturer decide to launch a new model, the investigation made to know the

new requirements or technologies to apply are their sunk cost, in other words,

even if they decide to not launch the new model, they wont be able to recover

the cost. If they decide to produce it or not, anyway theyll have to pay costs as

electricity or rents in case the land is not owned by them. And finally, their

variable costs going to be measured per how many units they decide to produce.

Q12. You were recently hired to replace the manager of the Roller

Division at a major conveyor-manufacturing firm, despite the managers

strong external sales record. Roller manufacturing is relatively simple,

requiring only labor and a machine that cuts and crimps rollers. As you

begin reviewing the companys production information, you learn that

labor is paid $8 per hour and the last worker hired produced 100 rollers

per hour. The company rents roller cutters and crimping machines for

$16 per hour, and the marginal product of capital is 100 rollers per

hour. What do you think the previous manager could have done to keep

his job?

Answer

MPK MPL

=

r w

=

$ 16 per hour $ 8 per hour

$ 6.25 $ 12.5

He wasnt minimizing costs, because we can see that the marginal product of

capital is the same than the labor, but cost just the half. So, the company must

rent more roller cutters and crimping machines and hire less workers.

Q16. The World of Videos operates a retail store that rents movie

videos. For each of the last 10 years, World of Videos has consistently

earned profits exceeding $25,000 per year. The store is located on

prime real estate in a college town. World of Videos pays $2,000 per

month in rent for its building, but it uses only 50 percent of the square

footage rented for video rental purposes. The other portion of rented

space is essentially vacant. Noticing that World of Videos only occupies

a portion of the building, a real estate agent told the owner of World of

Videos that she could add $1,200 per month to her firms profits by

renting out the unused portion of the store. While the prospect of

adding an additional $1,200 to World of Videoss bottom line was

enticing, the owner was also contemplating using the additional space

to rent video games. What is the opportunity cost of using the unused

portion of the building for video game rentals?

Answer

As the rent is a sunk cost to this new service she wants to offer, because anyway

shell need to pay for the video rental business, the opportunity cost is just the

money she can lose because of not rent the space. That us $1,200 per month or

$14,400 per year

Q20. According to The Wall Street Journal, Mitsubishi Motors recently

announced a major restructuring plan in an attempt to reverse

declining global sales. Suppose that as part of the restructuring plan

Mitsubishi conducts an analysis of how labor and capital are used in its

production process. Prior to restructuring Mitsubishis marginal rate of

technical substitution is 0.15 (in absolute value). To hire workers,

suppose that Mitsubishi must pay the competitive hourly wage of

1,330. In the study of its production process and markets where

capital is procured, suppose that Mitsubishi determines that its

marginal productivity of capital is 0.5 small cars per hour at its new

targeted level of output and that capital is procured in a highly

competitive market. The same study indicates that the average selling

price of Mitsubishis smallest car is 950,000. Determine the rate at

which Mitsubishi can rent capital and the marginal productivity of labor

at its new targeted level of output. To minimize costs Mitsubishi should

hire capital and labor until the marginal rate of technical substitution

reaches what proportion?

Answer

PML

MRTS= =0.15

PMK

PML

MRTS= =0.15

0.5

PML=0.15 0.5=0.075

So the proportion to get the new level of output is 0.5 of PMK and 0.075 of PML.

And in order to minimize costs, the proportion must reach:

PMK P=r

0.5 950,000=475,000

1,330 PML

=

475,000 PMK

PML

0.028=

PMK

Now we can conclude that to minimize costs, the new proportion must be equal

to 0.028.

- Cheat Sheet for Test 4 UpdatedUploaded byKayla Shelton
- STS Modern TimesUploaded byCharlie Kent
- Chapter 2Uploaded byappvienna
- RVJ-Processed and Packed Curd for the Indian MarketUploaded byNishant Sharma
- SPSS 19 Answers to Selected ExercisesUploaded byAnkur Aggarwal
- spssUploaded byIrda Nurul Pratiwi
- Logistic Regression a PrimerUploaded bymarsian_in4605
- One Factor Repeated Measures Design on SPSS_1Uploaded byHowisstifflucky
- JURNAL INTER OBSERVER VARIATIONUploaded byFeby Dina Ardianti
- S2.Lab.repeatedUploaded byHasmaye Pinto
- Annals of BotanyUploaded byKathyaG88
- Dairy Market to Grow by 13Uploaded bySoumya Ranjan Swain
- Course TextUploaded bySrijit Sanyal
- StatsUploaded byRia Alexis Gonzales
- 9712Uploaded byEx Lee
- A577CD017017.pdfUploaded byjnf
- berat basahUploaded byDanar Fahmi Sudarsono
- AlokKumar_DissertationFinalUploaded byMonal Mehta
- Assignment 3Uploaded byMohsin Shahzad
- Time Series Properties of an Artificial Stock MarketUploaded byalexa_sherpy
- 9.LAMPIRAN.docxUploaded byFaridNor
- Updt CV_ki_SPUploaded byAnonymous 3y0NTqo9s
- Updt CV Ki SP-copy-1Uploaded byAnonymous ffYiS7CG
- Bio StatisticsUploaded byMEOW41
- Direct Selling 2Uploaded bySayan Mitra
- Optimization of Process Parameters of Pulsed TIG Welded Maraging Steel C300Uploaded byKaushik Sengupta
- Mathematical Modelling of Surface Roughness in Turning of Stainless Steel (304 L) using Rayleigh’s MethodUploaded byIJRASETPublications
- 1234567890Uploaded byDan Bermas
- 5305319Uploaded byИлья Левин
- Mohan InternshipUploaded byMohan Manu

- ISOM2700 CheatsheetUploaded byJeremy Lee
- Microeconomics 2Uploaded bySREEKUMAR
- 9.docxUploaded byRechil Torregosa
- Concept of Consumer BehaviourUploaded byAnupriyaSanga
- Bullwhip-effect-mitigation-of-green-supply-chain-opti_2018_Journal-of-Cleane.pdfUploaded byHadiBies
- BEC Notes Chapter 2Uploaded bycpacfa
- Simulation ExamplesUploaded byAnthony Carmelo
- Demand & SupplyUploaded bybrandy684
- Microeconomics Short NotesUploaded byNaseer Shahzada
- UNIT - 1Uploaded byAbhishek Chakraborty
- Syllabus Master Mistress PGTUploaded bySaikat Dutta
- PESTEL Analysis of the MacroUploaded bytouseef1234
- Unit II Demand Analysis i 2015Uploaded byDarshan Jain
- Getting Started Guide NewUploaded byRashad Sayaf
- aircargo_guide_2013.pdfUploaded byIndro Chatistiyarso
- GAS NATURAL.pdfUploaded byAbel Alonso Ballon Aguirre
- Ch1 Naked EconomicsUploaded bysnowmandan
- UntitledUploaded byLesson Study Project
- Inventory Models - NewUploaded bylulughosh
- Chapter 6Uploaded byMosomi Machoka Selvon
- Managerial Economics- Scope and ObjectivesUploaded byProfessor Tarun Das
- Product Differentiation and Coop GovernanceUploaded byKolegica Sami Joe
- Student Slides Chapter 12Uploaded byGanessa Roland
- BBEK1103 Principles of Microeonomics_Microeonomics IUploaded byTay Ghee Seng
- Unit 3 Marketing[1]Uploaded bySam catlin
- Profit MaximisationUploaded byIrfan Jamal
- IRVOL COmmodity Prices-FedUploaded bySilverio J. Vasquez
- IUG Feasibility Study Mid-term Exam 4 December 2014Uploaded byAkramElKomey
- Consumer TheoryUploaded bynadiyaali
- Theory of the Firm 2 Study GuideUploaded byJoep Minderhoud

## Much more than documents.

Discover everything Scribd has to offer, including books and audiobooks from major publishers.

Cancel anytime.