Question: An estimate of the demand function for

> 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

> If Boeing’s dollar aircraft prices increase 20 percent and the yen/dollar exchange rate declines 15 percent, what effective price increase is facing Japan Air Lines for the purchase of a Boeing 747? Would Boeing’s margin likely rise or fall if the yen th

> a. Fred’s Hardware and Hobby House expects its sales to increase at a constant rate of 8 percent per year over the next three years. Current sales are $100,000. Forecast sales for each of the next three years. b. If sales in 2003 were $60,000 and they gr

> If the domestic prices for traded goods rose 40 percent over 10 years in China and 25 percent over those same 10 years in the United States, what would happen to a freely floating Chinese yuan/U.S. dollar exchange rate? Why?

> Would increased cost inflation in the United States relative to its major trading partners likely increase or decrease the value of the U.S. dollar? Why?

> Discuss the problems of aircraft noise around an airport from an externality perspective and propose a possible solution if: (a) housing existed in the airport area before the airport was built and (b) housing was built adjacent to the airport after th

> The industry demand function for bulk plastics is represented by the following equation: P = 800 - 20Q where Q represents millions of pounds of plastic. The total cost function for the industry, exclusive of a required return on invested capital, is:

> Would you consider the fractional ownership jet taxi industry (NetJets, FlexJets, etc.) to be a contestable market? Why or why not?

> What three factors determine whether two economies with separate fiscal and monetary authorities should form a currency union? Give an illustration of each factor using NAFTA economies.

> What are the incentives to innovate for a monopoly firm as compared with a firm in a competitive market if patent protection is not available?

> Sony’s PlayStation 2 (PS2) dominated the game console market from 1997–2003 with 123 million units sold. Today, Nintendo’s Wii has 62 percent of the market. Prices to achieve this spectacular growth have fallen continuously from $400 at launch to $250. S

> If the U.S. dollar were to appreciate substantially, what steps could a domestic manufacturer such as Cummins Engine Co. of Columbus, Indiana, take in advance to reduce the effect of the exchange rate fluctuation on company profitability?

> Use the monthly series on the Consumer Price Index (all items) from the previous two years to produce a forecast of the CPI for each of the next three years. Is the precision of your forecast greater or less at 36 months ahead than at 12 months ahead? W

> Define Q to be the level of output produced and sold, and assume that the firm’s cost function is given by the relationship: TC = 20 + 5Q + Q2 Furthermore, assume that the demand for the output of the firm is a function of price P given by the relation

> The forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned-ride snowmobiles. The model specifies that sales S vary jointly with disposable personal income Y and the population between ages 15 and 40, Z, a

> Differentiate the following functions: a. Y = 2X3 / (4X2 – 1) b. Y = 2X / (4X2 – 1) c. Y = 8Z2 - 4Z þ 1, where Z = 2X2 - 1 (differentiate Y with respect to X)

> 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.

> Consider again the Sherwin-Williams Company example discussed in this chapter (see Table 4.1). Suppose one is interested in developing a multiple regression model with paint sales (Y) as the dependent variable and promotional expenditures (A) and selling

> The causes and consequences of the global financial crisis (GFC) are numerous and remain hotly debated. One catalyst was clearly the collapse of the U.S. housing market in 2007–2008. The Federal Reserve played a role by overstimulating the economy during

> The summer months bring warm weather, mega fauna (bears), and tourists to the coastal towns of Alaska. Skagway at the top of the Inland Passage was, in the nineteenth century, the entrance to the Yukon. Today this town attracts multiple cruise ships per

> Demand can be estimated with experimental data, time-series data, or cross-section data. Sara Lee Corporation generates experimental data in test stores where the effect of an NFL-licensed Carolina Panthers logo on Champion sweatshirt sales can be carefu

> The Leisure Products (LP) Company manufactures lawn and patio furniture. Most of its output is sold to do-it-yourself warehouse stores (e.g., Lowe’s Home Improvement) and to retail hardware and department store chains (e.g., Ace Hardware and JCPenney), w

> Analyze the data on inflation rates, interest rates, and growth rate forecasts in Table 6.1 to determine what the likely near-term trend movement of the U.S. dollar will be. Analyze how each of the previously mentioned factors will affect the euroâ

> Amazon’s new tablet computer, the Kindle Fire, has slim margins at its $199 retail price. Admittedly, this product is trying to change the way we read books. It is therefore positioned so as to penetrate a revolutionary new target market, the twentysomet

> Tax-relief competition between states seeking high-paying industrial jobs threatens to overpay for any conceivable net benefits. In 1993, Alabama paid more than $300 million in highway, rail, sewer, and other infrastructure investments to obtain a $300 m

> Boeing finishes assembly of wide-bodied commercial aircraft in several sizes at the rate of about one per day. Customers first pay a deposit of one-third of $84 to $127 million for a 767, one-third of $134 to $185 million for a 777, and one-third of $165

> Motorola’s Iridium, a go-anywhere mobile phone system that transmitted and received signals beamed down from 66 satellites, was called “the eighth wonder of the world” by Motorola CEO Chris Galvin. However, at $1,500 for a handset the size of a brick, co

> The setting is a Ralph Lauren outlet store, and the product line is Polo golf shirts. A product manager and the General Manager for Outlet Sales are analyzing the discounted price to be offered at the outlet stores. Let’s work through t

> The state of Glottamora has $100 million remaining in its budget for the current year. One alternative is to give Glottamorans a one-time tax rebate. Alternatively, two proposals have been made for state expenditures of these funds. The first proposed pr

> The Gordon Company currently pays an annual common stock dividend of $4.00 per share. Its dividend payments have been growing at a steady rate of 6 percent per year, and this rate of growth is expected to continue for the foreseeable future. Gordon’s com

> The Charlotte Bobcats, a professional basketball team, has been offered the opportunity to purchase the contract of an aging superstar basketball player from another team. The general manager of the Bobcats wants to analyze the offer as a capital budgeti

> Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expecte

> A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000 outlay will be charged off as an expense by the firm this year (year 0). The returns estimated from the program in the form of greater productivity and a

> A machine that costs $12,000 is expected to operate for 10 years. The estimated salvage value at the end of 10 years is $0. The machine is expected to save the company $2,331 per year before taxes and depreciation. The company depreciates its assets on a

> The Department of Transportation wishes to choose between two alternative accident prevention programs. It has identified three benefits to be gained from such programs: • Reduced property damage, both to the vehicles involved in an acc

> A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses the straight-line depreciation method with a zero sal

> Branding Iron Products, a specialty steel fabricator, operates a plant in the town of West Star, Texas. The town has grown rapidly because of recent discoveries of oil and gas in the area. Many of the new residents have expressed concern at the amount of

> A sheep rancher leased the mineral rights beneath her grazing land to an oil company. She fears that discharges from the oil wells will pollute her underground water resources. Consequently, the contract for the sale of mineral rights requires that the r

> The demand for haddock has been estimated as where Q = quantity of haddock sold in New England P = price per pound of haddock I = a measure of personal income in the New England region Pm = an index of the price of meat and poultry If b = -2.174, c

> Use the cost and demand functions in Exercise 5 to calculate the following: a. Determine the marginal revenue and marginal cost functions. b. Show that, at the profit-maximizing output level determined in part (b) of the previous exercise, marginal reve

> Borders Books, once the leading chain of bookshop retailers, entered into an agreement with Amazon.com, the online retailer, to fulfill Internet orders from the Borders.com Web site. Using Table 15.3 and the following questions, what organizational form

> The long-term effects of ozone depletion from hydrochlorofluorocarbon (HCFC) emissions and of CO2 and other greenhouse gases from the burning of fossil fuels are controversial. Environmental scientists insist that the release of HCFCs opened a gaping hol

> The HIV/AIDS crisis has been called the worst pandemic since the fourteenth century’s Black Plague. The first incident of HIV/AIDS was discovered by the U.S. Centers for Disease Control in 1981. Over the next three decades, 60 million people have become

> Charging $17.99 a month for an unlimited number of movie rentals (three at one time), Netflix revolutionized the movie rental business with a one-day mailing service for DVDs and acquired 12 million subscribers and $1.5 billion in revenue. However, Block

> Firm-specific demand in the scheduled airline industry is segmented by customer class and is highly uncertain so that an order may not lead to realized revenue and a unit reservations at preannounced fares and reassigning capacity to the various market s

> The following cost-output data were obtained as part of a study of the economies of scale in operating a charter high school in Wisconsin: Required: 1. Plot the data in columns B and C in an output (enrollment) cost graph and sketch a smooth curve tha

> You are the lead underwriter among a syndicate of five investment banks composed of yourself, the syndicate co-manager, and syndicate members 3, 4, and 5. Your syndicate finds a deal worth $100 million in fees. You must submit a proposal as to how the fe

> Economists at the Wilson Company are interested in developing a production function or fertilizer plants. They collected data on 15 different plants that produce fertilizer (see the following table). Required: 1. Estimate the Cobb-Douglas production f

> Explore the crisis that Internet file sharing of copyrighted music recordings has caused for Vivendi Universal, Sony Music, EMI, and AOL Time Warner Music, which together formerly supplied 70 percent of the global music industry. Required: 1. How would

> Given the following market share distributions, the U.S. Antitrust Division blocked a merger of BMG and EMI in 2001, and the European Commission blocked a merger of Time Warner’s music division and EMI in 2000. Analyze these decisions a

> 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

> Airlines face highly cyclical demand; American reported profitability in the strong expansion of 2006–2007 but massive losses in the severe recession of 2008–2009. Demand also fluctuates day to day. One of the ways American copes with random demand is th

> Specific Electric Co. asks you to implement a pay-for-performance incentive contract for its new CEO and four EVPs on the Executive Committee. The five managers can either work really hard with 70 hour weeks at a personal opportunity cost of $200,000 in

> The Williams Company has a present capital structure (that it considers optimal) consisting of 30 percent long-term debt and 70 percent common equity. The company plans to finance next year’s capital budget with additional long-term debt and retained ear

> If Apple iPod only played iTunes, and iTunes only could be heard on the Apple iPod, could Apple price the technologically integrated bundle any way it wanted? If other electronic music can play on an iPod, what determines whether there are any limitation

> Would warehouse operators insist on owning their own trucking companies? Why or why not? What coordination and control problems and contractual hazards would these companies encounter?

> If coal mine tonnage can be shipped elsewhere cheaply, but an adjacent coal-fired power plant is not redeployable to other uses, what organizational form would be adopted by the power plant owners? Why?

> In the game-theoretic model of workouts and rollovers (Figure 15.2), identify the specific consequences of loan terms that worsen the moral hazard problem. Data from figure 15.2: FIGURE 15.2 The Problem of Moral Hazard in Line-of-Credit Lending: A

> The price elasticity of demand for a textbook sold in the United States is estimated to be - 2, whereas the price elasticity of demand for books sold overseas is - 3. The U.S. market requires hardcover books with a marginal cost of $40; the overseas ma

> Nike and Adidas face the following coordination problem in trying to decide whether to conduct heavy or light combative advertising against the other firm. What should each firm do? Nike Light Ads Heavy Ads $12 M $6 M Light Ads $10 M $4 M Adidas $4

> Why should the early adopters of an information technology system provided by IBM Systems Solutions be willing to pay more for a closed-end lease of the servers and other hardware required than for an outright purchase?

> Suppose you have announced you will “meet the competition” in response to entry threats by a potential rival who has done marketing research in your target market and is offering a lower price point. What difference does it make, if any, if technology is

> The long competition between Subway and Quizno’s subshops took price from $6 to $5 for selected Footlongs. Eventually, Quizno’s dropped price another dollar to $4 with its Torpedo product. Market share rose for Quizno’s relative to its head to head Footl

> Analyze the following sequential game and advise Kodak about whether they should introduce the new product, Picture CD. Rival New product Introduction advertising Pricing policy Kodak Sony High $380m $620m Kodak Moderate $610m $590m Increase ads Low

> If core price inflation has grown at a compound growth rate of 2 percent per annum in the United States and 0.06 percent in Japan for the past eight years, what exchange rate represents PPP today if the two currencies eight years ago in 2005 were in pari

> Would cappuccino by the cup or Prada handbags have wider price variation in a free trade area like the European Union? Why?

> Compare the optimal solutions obtained in Exercises 2 and 3. Specifically: a. How much higher (lower) is the optimal selling price when the two firms form a cartel to maximize industry profits, compared to when they act independently? b. How much higher

> If unit labor costs in Spain and Portugal rise, but unit labor costs in Germany decline and other producer prices remain unchanged, what effect should these factors, by themselves, have on export trade, and why?

> The costs of producing steel have declined substantially from building a conventional hot-rolled steel mill down to the new minimill technology that requires only scrap metal, an electric furnace, and 300 workers rather than iron ore raw materials, enorm

> Assuming that all other factors remain unchanged, determine how a firm’s breakeven point is affected by each of the following: a. The firm finds it necessary to reduce the price per unit because of increased foreign competition. b. The firm’s direct labo

> If the U.S. dollar depreciates 20 percent, how does this affect the export and domestic sales of a U.S. manufacturer? Explain.

> After an unanticipated dollar appreciation has occurred, what would you recommend a company such as Cummins Engine do with its strong domestic currency?

> Explain the effect on capacity reallocations of advance sales data indicating mean demand of 55 rather than 60 during a slow travel week for business class, using the information in Figure 14.1, Table 14.2, and Equation 14A.4. Data from figure 14.1:

> Suppose an appliance manufacturer is doing a regression analysis, using quarterly time-series data, of the factors affecting its sales of appliances. A regression equation was estimated between appliance sales (in dollars) as the dependent variable and d

> Identify some cultural differences between people who work in a hospital and a manufacturing plant.

> List several words that you use all the time that others may not use or that they pronounce differently.

> Because you are reading this book, you are probably taking a course at a university. Does the university use the gangplank theory to any extent? Explain.

> Why is the circle used for the model of communication? What is meant by communicating to someone and not with someone?

> Give an example of polarization that you have observed.