Question: Alchem (L) is the price leader in

> Kitchen Helper Company decides to produce and sell food blenders and is considering three different types of production facilities (“plants”). Plant A is a laborintensive facility, employing relatively little specializ

> Define Q as the level of output produced and sold, and suppose that a firm’s total revenue (TR) and total cost (TC) functions can be represented in tabular form as shown here. a. Compute the marginal revenue and average revenue functi

> A manufacturing plant has a potential production capacity of 1,000 units per month (capacity can be increased by 10 percent if subcontractors are employed). The plant is normally operated at about 80 percent of capacity. Operating the plant above this le

> From your knowledge of the relationships among the various cost functions, complete the following table. Q TTC TFC TVC АТС AFC AVC MC 125 - - - 10 - - - - - 20 10.50 30 110 40 255 - 50 60 3 70 - - 80 295

> From your knowledge of the relationships among the various production functions, complete the following table: VARIABLE TOTAL AVERAGE MARGINAL INPUT PRODUCT PRODUCT PRODUCT ТР. (- Q) APL MPL L. 1 8 28 18 | 4 26 | 5 20 6. 108 -10

> US Airways owns a piece of land near the Pittsburgh International Airport. The land originally cost US Airways $375,000. The airline is considering building a new training center on this land. US Airways determined that the proposal to build the new faci

> Despite a decade of subsidies and considerable success in Denmark, Germany, and Britain, renewable energy in the U.S. accounts for only 7 to 8 percent of total energy consumption. Hydroelectric power remains the most successful source of renewable energy

> Ethanol is again viewed as one part of a solution to the problem of shortages of petroleum products. Ethanol is made from a blend of gasoline and alcohol derived from corn or sugarcane. What would you expect the impact of this program to bem on the price

> If the decision to develop and license or wait and imitate in Table 16.6 is a simultaneous-play repeated game between Lucent and Motorola for each new generation of technology, what happens if the Motorola payoff in the southwest cell is positive $2 bill

> An industry produces its product, Scruffs, at a constant marginal cost of $50. The market demand for Scruffs is equal to: Q = 75,000 - 600P a. What is the value to a monopolist who is able to develop a patented process for producing Scruffs at a cost

> Explain how the optimal incentives contract would differ if the less risk-averse bank officer (Dashing in Figure 15.4) had generated the smaller expected profit (i.e., the lower hill-shaped curve). Data from figure 15.4: FIGURE 15.4 Sorting Manager

> In benchmarking sales representatives against one another, what problems arise from continuing to reassign the above-average trade representatives to previously unproductive sales territories?

> General Cereals is using a regression model to estimate the demand for Tweetie Sweeties, a whistle-shaped, sugar-coated breakfast cereal for children. The following (multiplicative exponential) demand function is being used:

> Television channel operating profits vary from as high as 45 to 55 percent at MTV and Nickelodeon down to 12 to 18 percent at NBC and ABC. Provide a Porter Five Forces analysis of each type of network. Why is MTV so profitable relative to the major netwo

> What organizational form would warehouse operators and truck hauling companies adopt?

> How might the lender in Figure 15.2 use knowledge of the type of asset booked by the borrower on its balance sheet to offset the liability for the loan extension? Commercial loan covenants often include a restriction on precisely this balance-sheet decis

> Savings-Mart (a chain of discount department stores) sells patio and lawn furniture. Sales are seasonal, with higher sales during the spring and summer quarters and lower sales during the fall and winter quarters. The company developed the following quar

> If contract promises were not excused because of acts of war, would the clearing and settlements clients of Bank of New York change their behavior? If so, how? What reliance behavior would be considered efficient? What reliance behavior would be consider

> Analyze the pure Nash equilibrium and mixed Nash equilibrium strategies in the following manufacturer–distributor coordination game. How would you recommend restructuring the game to secure higher expected profit for the manufacturer?

> In the Division of a Decaying Business game, what should you offer if the assets at the start of the game are $4 million rather than $3 million? Now is there a first mover or second-mover advantage? Why?

> Suppose an enhanced effectiveness of cooperative advertising occurs if the distributor shares its superior on-the-spot information about current trends in the marketplace with the manufacturer. Explain how each of the following would affect the informati

> The Pear Computer Company just developed a totally revolutionary new personal computer. It estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be: P = 2,500 &aci

> If notorious firm behavior (i.e., defrauding a buyer of high-priced experience goods by delivering low quality) becomes known throughout the marketplace only with a lag of three periods, profits on high-quality transactions remain the same, and interest

> General Medical makes disposable syringes for hospitals and doctor supply companies. The company uses cost-plus pricing and currently charges 150 percent of average variable costs. General Medical learned of an opportunity to sell 300,000 syringes to the

> In the face of stable (or declining) enrollments and increasing costs, many colleges and universities, both public and private, find themselves in progressively tighter financial dilemmas that require basic reexamination of the pricing schemes used by in

> Phillips Industries manufactures a certain product that can be sold directly to retail outlets or to the Superior Company for further processing and eventual sale as a completely different product. The demand function for each of these markets is: Retai

> Cascade Pharmaceuticals Company developed the following regression model, using time-series data from the past 33 quarters, for one of its nonprescription cold remedies: where Y = quarterly sales (in thousands of cases) of the cold remedy X1 = Cascade

> Sort the following products into those priced with two-part tariffs, user charges only, or lump-sum access fees only: pay-per-view movies on cable TV, pay phones, Netflix, iTunes, country club membership, soda from vending machines, laundromats, cell pho

> Explain the concept of maximum sustainable yield for a fishery. Is maximum sustainable yield the most efficient rate of harvest for a renewable natural resource? Is it required to preserve biological diversity?

> Consider again the total revenue and total cost functions shown in tabular form in the previous problem. a. Compute the total, marginal, and average profit functions. b. On a single graph, plot the total profit and marginal profit functions. c. Determine

> Bell Greenhouses has estimated its monthly demand for potting soil to be the following: N = 400 + 4X where N = monthly demand for bags of potting soil X = time periods in months (March 2006 = 0) A

> A U.S. export-import shipping company operates a general cargo carrier service between New York and several western European ports. It hauls two major categories of freight: manufactured items and semimanufactured raw materials. The demand functions for

> The price elasticity of demand for air travel differs radically from first-class (- 1.3) to unrestricted coach (- 1.4) to restricted discount coach (- 1.9). What do these elasticities mean for optimal prices (fares) on a cross-country trip with increment

> The county assessor (see Exercise 4) feels that the use of more independent variables in the regression equation might improve the overall explanatory power of the model. In addition to size, the assessor feels that the total number of rooms, age, and wh

> People who are regularly late often don’t bother to carry watches. In response, other people tend to adjust to their tardiness by starting meetings 10 minutes after they’re scheduled, coming to lunch appointments 10 mi

> Consider an ongoing sequence of pair wise marketing competitions between three companies with promotional campaigns of varying degrees of success. Each campaign involves comparative advertising belittling the target company. The company with the most loy

> How do the analysis and the strategic equilibrium outcome differ in Exercise 4 if the other firm enjoys a cost advantage (e.g., $35 at AA&D)? Then does the order of play (i.e., who goes first in making price cuts) matter in this bidding game with asymmet

> Two insurance companies that manage employee benefit programs are bidding for additional business in their area of expertise at a market rate of $200 per hour. The potential customers refuse to leave their current suppliers and award benefit management c

> Suppose that two mining companies, Australian Minerals Company (AMC) and South African Mines, Inc. (SAMI), control the only sources of a rare mineral used in making certain electronic components. The companies have agreed to form a cartel to set the (pro

> Consider the following payoff matrix: a. Does Player A have a dominant strategy? Explain why or why not. b. Does Player B have a dominant strategy? Explain why or why not. Player B Strategy 1 2 $1,000 -$2,000 1 $2,000 -$1,000 Player A Strategy -$1,

> A math graduate student explains to her friend how to approach a group of smart attractive guys who have brought along famous actor Russell Crowe. What should her friend do? Ignore Russell Crowe or fixate on Russell Crowe? Explain the equilibrium reasoni

> Show that the optimal solution to the set of simultaneous equations in the Indiana Petroleum example are Q*1 = 5.77 and Q*2 = 4.08.

> With interest rates at historic lows in the United States, what is the effect on the optimal rate of extraction for a Texas oilfield owner? Explain the intuition that supports your answer.

> In a study of housing demand, the county assessor is interested in developing a regression model to estimate the market value (i.e., selling price) of residential property within his jurisdiction. The assessor feels that the most important variable affec

> Which of the following products and services are likely to encounter adverse selection problems: golf shirts at traveling pro tournaments, certified gemstones from Tiffany’s, graduation gift travel packages, or mail-order auto parts? Why or why not?

> The Questor Corporation has experienced the following sales pattern over a 10-year period: YEAR SALES ($000) 2004……………….………………………………… 121 2005 ………………………………………………….130 2006 ………………………………………………….145 2007 ………………………………………

> The outcomes in the bottom half of the game tree describing the last (the 20th) submarket of the chain store paradox in Figure 13.2 are labeled NA (not applicable). Why? What specific equilibrium concept in sequential games rules out the applicability of

> Suppose that two Japanese companies, Hitachi and Toshiba, are the sole producers (i.e., duopolists) of a microprocessor chip used in a number of different brands of personal computers. Assume that total demand for the chips is fixed and that each firm ch

> Chillman Motors, Inc., believes it faces the following segmented demand function: P = 150 – 0.5Q when 0 Q 50 P = 200 – 1.5Q for Q > 50 a. Indicate both verbally and graphically why such a segmented demand function is likely to exist? What type of ind

> Consider Exercise 2 again. Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). a. Determine the optimum output and selling price for each firm. b. Determine Firm A, Firm B, a

> Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P = 200 – QA – QB where QA and QB are the quantities sold by the respective firms and P is the

> Assume that two companies (C and D) are duopolists that produce identical products. Demand for the products is given by the following linear demand function: P = 600 – QC – QD where QC and QD are the quantities sold by the respective firms and P is the

> What is the difference between transaction demand, speculative demand, and autonomous transactions by central banks? Which of these factors determines the longterm quarterly trends in exchange rates?

> The Odessa Independent Phone Company (OIPC) is currently engaged in a rate case that will set rates for its Midland-Odessa area customer base. OIPC has total assets of $20 million. The Texas Public Utility Commission has determined that an 11 percent ret

> The profitability of the leading cola syrup manufacturers PepsiCo and Coca-Cola and of the bottlers in the cola business is very different. PepsiCo and Coca- Cola enjoy an 81 percent operating profit as a percentage of sales; bottlers experience only a 1

> Figure 7A.3, shows the annual rate of crude oil extraction of the United States was basically unchanged 2002–2012. Not so for Saudi Arabia whose production increased 33%. Explain why with special attention to the price spike in mid-2008

> The Public Service Company of the Southwest is regulated by an elected state utility commission. The firm has total assets of $500,000. The demand function for its services has been estimated as: P = $250 - $0.15Q The firm faces the following total co

> Tennis Products, Inc., produces three models of high-quality tennis rackets. The following table contains recent information on the sales, costs, and profitability of the three models: The company is considering lowering the price of Model A to $27 in

> Determine the partial derivatives with respect to all of the variables in the following functions: a. TC = 50 + 5Q1 + 10Q2 + .5Q1Q2 b. Q = 1.5L .60 K .50 c. QA = 2.5P A -1.30 Y .20 P B -.40

> The Pilot Pen Company has decided to use 15 test markets to examine the sensitivity of demand for its new product to various prices, as shown in the following table. Advertising effort was identical in each market. Each market had approximately the same

> Wyandotte Chemical Company sells various chemicals to the automobile industry. Wyandotte currently sells 30,000 gallons of polyol per year at an average price of $15 per gallon. Fixed costs of manufacturing polyol are $90,000 per year and total variable

> Exotic Metals, Inc., a leading manufacturer of beryllium, which is used in many electronic products, estimates the following demand schedule for its product: PRICE ($/POUND) QUANTITY (POUNDS/PERIOD) $25……………………………………………… 0 18 ………

> Unique Creations holds a monopoly position in the production and sale of magnometers. The cost function facing Unique is estimated to be: TC = $100;000 + 20Q a. What is the marginal cost for Unique? b. If the price elasticity of demand for Unique is cu

> The Lumins Lamp Company, a producer of old-style oil lamps, estimated the following demand function for its product: Q = 120;000 - 10;000P where Q is the quantity demanded per year and P is

> A product manager has been reviewing selling expenses (i.e., advertising, sales commissions, etc.) associated with marketing a line of household cleaning products. The manager suspects that there may be some sort of diminishing marginal returns relations

> McKee Corporation has annual fixed costs of $12 million. Its variable cost ratio is 0.60. a. Determine the company’s break-even dollar sales volume. b. Determine the dollar sales volume required to earn a target profit of $3 million.

> Ajax Cleaning Products is a medium-sized firm operating in an industry dominated by one large firm—Tile King. Ajax produces a multiheaded tunnel wall scrubber that is similar to a model produced by Tile King. Ajax decides to charge the same price as Tile

> Information Resources, Inc. (IRI), collects data on consumer packaged goods at 32,000 scanner checkout counters and in panel surveys of 70,000 households. IRI records indicate that department store-brand pantyhose sell for a gross margin of 43 percent an

> The county assessor is concerned about possible multicollinearity between the size (X1) and total number of rooms (X2) variables. Calculate the correlation coefficient between these two variables and diagnose the magnitude of the collinearity problem. D

> Jordan Enterprises has estimated the contribution margin (P - MC)/P for its Air Express model of basketball shoes to be 40 percent. Based on market research and past experience, Jordan estimates the following relationship between the sales for Air Expres

> The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed:

> Royersford Knitting Mills, Ltd., sells a line of women’s knit underwear. The firm now sells about 20,000 pairs a year at an average price of $10 each. Fixed costs amount to $60,000, and total variable costs equal $120,000. The production department has e

> The economic analysis division of Mapco Enterprises has estimated the demand function for its line of weed trimmers as: QD = 18;000 + 0:4N − 350PM + 90Ps whereN = number of new homes completed in the primary ma

> Assume that a firm in a perfectly competitive industry has the following total cost schedule: OUTPUT (UNITS) TOTAL COST ($) 10………………………………………………………… 110 15 ………………………….……………………………..150 20……………………………………………….………. 180 25

> Consider the Sherwin-Williams Company example discussed in this chapter (see Table 4.1). Suppose one is interested in developing a simple regression model with paint sales (Y) as the dependent variable and selling price (P) as the independent variable.

> Why invest capital in purely competitive industries with equilibrium margins that are razor thin and entrants that erode quasi-profits? Suppose volume is not exceptionally large, why then?

> A study of the costs of electricity generation for a sample of 56 British firms in 1946–1947 yielded the following long-run cost function: AVC = 1.24 + 0.0033Q + 0.0000029Q2 + 0.000046QZ + 0.026Z + 0.00018Z2 where AVC = average variable cost

> Referring to Exercise 1 again: a. Holding constant the effects of bank branching (X1), determine the level of total assets that minimizes the average operating expense ratio. b. Determine the average operating expense ratio for a savings and loan associ

> An aircraft with 100 seats serves passengers through two types of fares: full ($550) and discount ($250). Extra passengers have $50 marginal cost. Demand for discount tickets is unlimited, while demand for full-fare tickets is evenly distributed between

> A study of 86 savings and loan associations in six northwestern states yielded the following cost function C = 2.38 – 0.006153Q + 0.000005359Q2 + 19.2X1 (2.84) (2:37) (2.63)

> The Santa Fe Cookie Factory is considering an expansion of its retail piñon cookie business to other cities. The firm’s owners lack the funds needed to undertake the expansion on their own. They are considering a franchise arrangement for the new outlets

> The Emerson Corporation, a manufacturer of airplane landing gear equipment, is trying to develop a learning curve model to help forecast labor costs for successive units of one of its products. From past data, the firm knows that labor costs of the 25th,

> The Blair Company’s three assembly plants are located in California, Georgia, and New Jersey. Previously, the company purchased a major subassembly, which becomes part of the final product, from an outside firm. Blair has decided to manufacture the subas

> The following table presents data on sales (S), advertising (A), and price (P): Estimate the following demand models: b. Determine whether the estimated values of β1 and β2 are statistically significant (at the 0.05 level). c.

> Mary Graham worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $

> Howard Bowen is a large-scale cotton farmer. The land and machinery he owns has a current market value of $4 million. Bowen owes his local bank $3 million. Last year Bowen sold $5 million worth of cotton. His variable operating costs were $4.5 million; a

> Consider the following Cobb-Douglas production function for the bus transportation system in a particular city: where L = labor input in worker hours F = fuel input in gallons K = capital input in number of buses Q = output measured in millions of bus

> Suppose that a firm’s production function is given by the following relationship: where Q = output L = labor input K = capital input a. Determine the percentage increase in output if labor input is increased by 10 percent (assuming t

> Consider the following short-run production function (where L = variable input, Q = output): Suppose that output can be sold for $10 per unit. Also assume that the firm can obtain as much of the variable input (L) as it needs at $20 per unit. a. Deter

> Conduct an in-class debate on a recent antitrust case and whether it was decided correctly. The case is Leegin Creative Products, Inc. v. PSKS, Inc., DBA Kay’s Kloset, 551, U.S. (2007). Leegin of Dallas Texas makes upscale leather accessories somewhat li

> Stowe Automotive is considering an offer from Indula to build a plant making automotive parts for use in that country. In preparation for a final decision, Stowe’s economists have been hard at work constructing a basic econometric model for Indula to aid

> Consider the following short-run production function (where L = variable input, Q = output): a. Determine the marginal product function (MPL). b. Determine the average product function (APL). c. Find the value of L that maximizes Q. d. Find the value o

> Consider Exercise 3 again. Suppose the owner of the trawler can sell all the fish caught for $75 per 100 pounds and can hire as many crew members as desired by paying them $150 per week. Assuming that the owner of the trawler is interested in maximizing

> Bounds Inc. determined through regression analysis that its sales (S) are a function of the amount of advertising (measured in units) in two different media. This relationship is given by the following equation (X = newspapers, Y = magazines): S(X; Y) =

> Using the data in Table 4.1 for the Sherwin-Williams Company, estimate a multiplicative exponential demand model (see Equation 4.5) for paint sales. Data from Equation 4.5: Data from Table 4.1: b. Compare the results in part (a) (i.e., parameter es

> Lobo Lighting Corporation currently employs 100 unskilled laborers, 80 factory technicians, 30 skilled machinists, and 40 skilled electricians. Lobo feels that the marginal product of the last unskilled laborer is 400 lights per week, the marginal produc

> Extension of the Cobb-Douglas Production Function—The Cobb-Douglas production function (Equation 7.16) can be shown to be a special case of a larger class of linear homogeneous production functions having the following mathematical form

> Unit labor costs in Germany approach $30 per hour, whereas in Britain unit labor costs are only $20 per hour. Why would such a large difference persist between two members of the EU free trade area?

> Suppose an industry is composed of eight firms with the following market shares: Based on the (revised 2010) merger guidelines, would the Antitrust Division likely challenge a proposed merger between. a. Firms C and D (assume the combined market share

> An industry is composed of Firm 1, which controls 70 percent of the market, Firm 2 with 15 percent of the market, and Firm 3 with 5 percent of the market. About 20 firms of approximately equal size divide the remaining 10 percent of the market. Calculate