Question: In the Columbia Gas of Ohio study

> What are transaction costs? How does opportunistic behavior tend to increase transaction costs?

> Do you believe that the profit maximization model can be applied to the activities of a multinational corporation? Explain.

> Is the maximization of profit margin (profit as a percentage of total sales) a valid financial objective of a corporation? Discuss.

> You have a choice of opening your own business or being employed by someone else in a similar type of business. What are some of the considerations in terms of opportunity costs that you would have to include in arriving at your decision?

> Suppose a firm has the following demand equation: Q = 1,000 - 3,000P + 10A where Q = quantity demanded P = product price (in dollars) A = advertising expenditure (in dollars) Assume for the following questions that P = $3 and A = $2,000. a. Suppose the f

> The following is a quote from a New York Times article: “If a company makes product donations to the school—computers for instance—then the image of a company goes up as graduate students use the company’s products.” Does such action square with a compan

> Because of inflation, a company must replace one of its (fully depreciated) machines at twice the nominal price paid for a similar machine 8 years ago. Based on present accounting rules, will the company have covered the entire cost of the new machine th

> (Optional) Have you been personally involved in the making of a decision for a business concerning what, how, or for whom? If so, explain your rationale for making such decisions. Were these decisions guided by the market process, the command process, or

> What do you think is the key to success in the soft drink industry? What chance do you think Global Foods has in succeeding in its new venture into the soft drink market? Explain. (Answer these questions on the basis of the information provided in the ch

> Compare and contrast microeconomics with macroeconomics. Although managerial economics is based primarily on microeconomics, explain why it is also important for managers to understand macroeconomics.

> Explain the differences between management skills and entrepreneurship. Discuss how each factor contributes to the economic success of a business.

> Discuss the importance of the command process and the traditional process in the making of management decisions. Illustrate specific ways in which managers must take these two processes into account.

> Define the market process, the command process, and the traditional process. How does each process deal with the basic questions of what, how, and for whom?

> “The growth of consumer information organizations, legal requirements, and warranty requirements has caused significant increases in the cost of customer satisfaction. Thus it is no longer useful to talk about profit maximization as a company objective.”

> Elaborate on the basic economic questions of what, how, and for whom. Provide specific examples of these questions with respect to the use of a country’s scarce resources.

> Over the years, the market demand for “long-playing records made of polyvinyl has fallen considerably as new technologies replaced the old “LP.” Yet, LPs are still available for sale and they sell at price points higher (in some cases much higher) than C

> Define scarcity and opportunity cost. What role do these two concepts play in the making of management decisions?

> The following are the monthly changes in the index of leading economic indicators during 2001 and January 2002: What would be your prediction for the U.S. economy in 2002? January February +.1 August September October +.1 -.6 March -.3 +.1 April Мa

> (Read the “The Market for Used Automobiles” section in Appendix 4A before answering the question.) When prices of used cars dropped about 10 percent in October 2001, their sales increased by 4.5 percent. Does this mean that the demand elasticity for used

> A Canadian apparel company, Roots, agreed to provide the U.S. Olympic team at the 2002 Winter Olympics with various types of clothing, including berets, for free, and further, to turn over a portion of its profits on sales of this clothing to the U.S. Ol

> A company has 2 million shares outstanding. It paid a dividend of $2 during the past year, and expects that dividends will grow at 6 percent annually in the future. Stockholders require a rate of return of 13 percent. What would you expect the price of e

> What are some reasons for companies internalizing transaction costs?

> If the income elasticity of tomatoes is estimated to approximate +0.25, what would you expect to happen to the consumption of tomatoes as personal income rises?

> You have been asked to produce a forecast for your company’s product, bottled water. Discuss the kind of information you would look for in order to make this forecast.

> If a demand curve facing a firm is horizontal or nearly so, what does it say about this firm’s competition?

> Various depreciation methods can be used to arrive at an accounting profit number. From the viewpoint of the economist, how should annual depreciation be determined?

> Illustrate the example of the world sugar market with supply and demand diagrams. Be sure to show how the relative shifts in supply and demand have led to the reduction in the world price of sugar.

> Could a straight-line demand curve ever have the same elasticity on all its points?

> How do implicit costs lead to a difference between accounting and economic profits?

> The immediate effect of gasoline price increases in the aftermath of the Persian Gulf crisis in August 1990 on gasoline consumption was not very significant. Would you expect the consumption of gasoline to be more severely affected if these higher prices

> Do you believe that profit (or shareholder wealth) maximization still represents the best overall economic objective for today’s corporation?

> Which products would exhibit a higher elasticity with respect to interest rates, automobiles or small appliances? Why?

> Why is it unlikely that a firm would sell at a price and quantity where its demand curve is price inelastic?

> Manhattan was allegedly purchased from Native Americans in 1626 for $24. If the sellers had invested this sum at a 6 percent interest rate compounded semiannually, how much would it amount to today?

> Following are examples of typical economic decisions made by the managers of a firm. Determine whether each is an example of what, how, or for whom. a. Should the company make its own spare parts or buy them from an outside vendor? b. Should the company

> List the key non price factors that influence demand and supply.

> How do econometric models differ from “naive” projection methods? Is it always advisable to use the former in forecasting?

> Joy’s Frozen Yogurt shops have enjoyed rapid growth in northeastern states in recent years. From the analysis of Joy’s various outlets, it was found that the demand curve follows this pattern: Q = 200 - 300P + 120I + 65T - 250Ac + 400Aj where Q = number

> Describe projections that use either moving averages or exponential smoothing. Under what conditions can these techniques be used? Which of the two appears to be the more useful?

> The compound growth rate is frequently used to forecast various quantities (sales, profits, and so on). Do you believe this is a good method? Should any cautions be exercised in making such projections?

> Discuss some of the important criticisms of the forecasting ability of the leading economic indicators.

> a. Why are manufacturers’ new orders, nondefense capital goods, an appropriate leading indicator? b. Why is the index of industrial production an appropriate coincident indicator? c. Why is the average prime rate charged by banks an appropriate lagging i

> Discuss the benefits and drawbacks of the following methods of forecasting: a. Jury of executive opinion b. The Delphi method c. Opinion polls Each method has its uses. What are they?

> Enumerate methods of qualitative and quantitative forecasting. What are the major differences between the two?

> “The best forecasting method is the one that gives the highest proportion of correct predictions.” Comment.

> What is the identification problem? What effect will this problem have on the regression estimates of a demand function? Explain.

> What is multicollinearity? How can researchers detect this problem? What is the impact of this problem on the regression estimates? What steps can be taken to deal with this problem?

> A book store opens across the street from the University Book Store (UBS). The new store carries the same textbooks but offers a price 20 percent lower than UBS. If the cross- price elasticity is estimated to be 1.5, and UBS does not respond to its compe

> The ABC marketing consulting firm found that a particular brand of tablet PCs has the following demand curve for a certain region: Q = 10,000 - 200P + 0.03Pop + 0.6I + 0.2A where Q is the quantity per month, P is price ($), Pop is population, I is dispos

> Based on past data, Mack’s Pool Supply has constructed the following equation for the sales of its house brand of chlorine tablets: Q = 1,000 + 100t where Q is quantity and t is time (in years), with 2007 = 0. a. What is the sales projection for 2013? b.

> If the sales of your company have grown from $500,000 five years ago to $1,050,150 this year, what is the compound growth rate? If you expect your sales to grow at a rate of 10 percent for the next five years, what should they be five years from now?

> The MNO Corporation is preparing for its stockholder meeting on May 15, 2013. It sent out proxies to its stockholders on March 15 and asked stockholders who plan to attend the meeting to respond. To plan for a sufficient number of information packages to

> An economist has estimated the sales trend line for the Sun Belt Toy Company as follows: St = 43.6 + 0.8t St represents Sun Belt’s monthly sales (in millions of dollars), and t = 1 in January 2008. The monthly seasonal indexes are as fo

> Office Enterprises (OE) produces a line of metal office file cabinets. The company’s economist, having investigated a large number of past data, has established the following equation of demand for these cabinets: Q = 10,000 + 60B - 100P + 50C where Q 5

> You have the following data for the last 12 months’ sales for the PRQ Corporation (in thousands of dollars): a. Calculate a 3-month centered moving average. b. Use this moving average to forecast sales for January of next year. c. If

> The Miracle Corporation had the following sales during the past 10 years (in thousands of dollars): a. Calculate a trend line, and forecast sales for 2013. How confident are you of this forecast? b. Use exponential smoothing with a smoothing factor w =

> The sales data over the last 10 years for the Acme Hardware Store are as follows: a. Calculate the compound growth rate for the period of 2003 to 2012. b. Based on your answer to part a, forecast sales for both 2013 and 2014. c. Now calculate the compo

> The sales data for the Lone star Sports Apparel Company for the last 12 years are as follows: a. What is the 2001–2012 compound growth rate? b. Using the result obtained in part a, what is your 2013 projection? c. If you were to make

> The following relations describe monthly demand and supply for a computer support service catering to small businesses. QD = 3,000 - 10P QS = -1,000 + 10P where Q is the number of businesses that need services and P is the monthly fee, in dollars. a. At

> You are given the following demand for European luxury automobiles: Q 5 1,000P 20.93PA0.75PJ1.2I 1.6 where P 5 Price of European luxury cars PA 5 Price of American luxury cars PJ 5 Price of Japanese luxury cars I 5 Annual income of car buyers Assume that

> A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q = +15,000 - 2.80P + 150A + 0.3Ppc + 0.35Pm + 0.2Pc (5,234)

> The maker of a leading brand of low-calorie microwavable food estimated the following demand equation for its product using data from 26 supermarkets around the country for the month of April: Q = -5,200 - 42P + 20PX + 5.2l + 0.20A + 0.25M (2.002) (17.5)

> You are the manager of a large automobile dealership who wants to learn more about the effectiveness of various discounts offered to customers over the past 14 months. Following are the average negotiated prices for each month and the quantities sold of

> One of the most difficult tasks in regression analysis is to obtain the data suitable for quantitative studies of this kind. Suppose you are trying to estimate the demand for home furniture. Suggest the kinds of variables that could be used to represent

> The Efficient Software Store had been selling a spreadsheet program at a rate of 100 per month and a graphics program at the rate of 50 per month. In September 2012, Efficient’s supplier lowered the price for the spreadsheet program, and Efficient passed

> The Mesa Redbirds football team plays in a stadium with a seating capacity of 80,000. However, during the past season, attendance averaged only 50,000. The average ticket price was $30. If price elasticity is −4, what price would the team have to charge

> The ABC Company manufactures digital clock radios and sells on average 3,000 units monthly at $25 each to retail stores. Its closest competitor produces a similar type of radio that sells for $28. a. If the demand for ABC’s product has an elasticity coef

> The Teenager Company makes and sells skateboards at an average price of $70 each. During the past year, they sold 4,000 of these skateboards. The company believes that the price elasticity for this product is about −2.5. If it decreases the price to $63,

> Mr. Smith has the following demand equation for a certain product: Q = 30 - 2P. a. At a price of $7, what is the point elasticity? b. Between prices of $5 and $6, what is the arc elasticity? c. If the market is made up of 100 individuals with demand curv

> The following relations describe the supply and demand for posters. QD = 65,000 - 10,000P QS = -35,000 + 15,000P where Q is the quantity and P is the price of a poster, in dollars. a. Complete the following table. b. What is the equilibrium price?

> The equation for a demand curve has been estimated to be Q = 100 - 10P + 0.5Y, where Q is quantity, P is price, and Y is income. Assume P = 7 and Y = 50. a. Interpret the equation. b. At a price of 7, what is price elasticity? c. At an income level of 50

> ABC Sports, a store that sells various types of sports clothing and other sports items, is planning to introduce a new design of Arizona Diamondbacks’ baseball caps. A consultant has estimated the demand curve to be Q = 2,000 - 100P where Q is cap sales

> The demand function for a cola-type soft drink in general is Q = 20 - 2P, where Q stands for quantity and P stands for price. a. Calculate point elastic cities at prices of 5 and 9. Is the demand curve elastic or inelastic at these points? b. Calculate a

> According to a study, the price elasticity of shoes in the United States is 0.7, and the income elasticity is 0.9. a. Would you suggest that the Brown Shoe Company cut its prices to increase its revenue? b. What would be expected to happen to the total q

> In order to attract more customers on Mondays (a slow day), Alex’s Pizza Shop in Austin decided to reduce the price of their pizza rolls from $3.50 to $2.50. As a result, Monday sales increased from 70 to 130. Also, Alex’s sales of soft drinks rose from

> Would you expect cross-price elasticity between the following pairs of products to be positive, negative, or zero? a. Television sets and DVRs b. Rye bread and whole wheat bread c. Construction of residential housing and furniture d. Breakfast cereal and

> Given the demand equation Q = 1,500 - 200P, calculate all the numbers necessary to fill in the following table: Elasticity Marginal Revenue Total Point Arc Revenue $7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50

> When the I Phone was launched in the second quarter of 2008, it was priced at $599, and Apple sold 270,000 units during this quarter. In mid-September of that year, Apple reduced the price to $434, and sales rose to 1,119,000 during this next quarter. Wi

> Manning Inc., is the leading manufacturer of garage doors. Demand for residential garage door sales depends, of course, on the rate of new house building activity, which in turn depends on changes in income per capita. During the past year, Manning sold

> The Distinctive Fashions Company increased its advertising budget for its leading brand of women’s yoga apparel from $10,000 in 2011 to $15,000 in 2012. Its sales increased from 900 units to 1,050 units, while the price remained the same at $120 per garm

> Consider the following supply and demand curves for a certain product. QS = 25,000P QD = 50,000 - 10,000P a. Plot the demand and supply curves. b. What are the equilibrium price and equilibrium quantity for the industry? Determine the answer both algebra

> (Read the “Newspapers and Their Price Elasticity” section in Appendix 4A before answering the question.) What is the arc demand elasticity for the London Times? What happened to revenue as a result of the price decrease?

> The Transportation Authority in Any town, USA, raised bus fares from $1 to $1.15 on January 1, 2011. The authority’s statistics show that the number of passengers riding buses decreased from 672,000 in 2011 to 623,000 in 2012. a. How much did revenue cha

> The demand curve for product a is given as Q = 2000 - 20P. a. How many units will be sold at $10? b. At what price would 2,000 units be sold? 0 units? 1,500? c. Write equations for total revenue and marginal revenue (in terms of Q). d. What will be the t

> The Compute Company store has been selling its special word processing software, Ace word, during the last 10 months. Monthly sales and the price for Ace word are shown in the following table. Also shown are the prices for a competitive software, Good wr

> A local supermarket lowers the price of its vanilla ice cream from $3.50 per half gallon to $3. Vanilla ice cream (unit) sales increase by 20 percent. The store manager notices that the (unit) sales of chocolate syrup increase by 10 percent. a. What is t

> The Acme Paper Company lowers its price of envelopes (1,000 count) from $6 to $5.40. If its sales increase by 20 percent following the price decrease, what is the elasticity coefficient?

> Background Information: Restaurants have traditionally used bottom-end wines to sell by the glass (BTG) at reasonably low prices per glass. In recent years, there has been a growing trend within the restaurant industry to extend BTG programs to higher-en

> Briefly explain the meaning of the F-test. Why do you think this test is considered to be more important in multiple regression analysis than it is in simple regression analysis?

> Summarize the steps involved in conducting the t-test. What is the basis for using the “rule of 2” as a convenient method of evaluating t-ratios?

> Briefly explain the meaning of R2. A time series analysis of demand tends to result in a higher R2 than one using cross-sectional data. Why do you think this is the case?

> Would there be any differences in the set of variables used in a regression model of the demand for consumer durable goods (e.g., automobiles, appliances, furniture) and a regression model of the demand for “fast-moving consumer goods” (e.g., food, bever

> Explain the difference between time series data and cross-sectional data. Provide examples of each type of data.

> Would you expect the cross-elasticity coefficients between each of the following pairs of products to be positive or negative? Why? a. Personal computers and software b. Electricity and natural gas c. Apples and oranges d. Bread and DVRs.

> What would you expect to happen to spending on food at home and spending on food in restaurants during a decline in economic activity? How would income elasticity of demand help explain these changes?

> Discuss the relative price elasticity of the following products: a. Mayonnaise b. A specific brand of mayonnaise c. Chevrolet automobiles d. Jaguar automobiles e. Washing machines f. Air travel (vacation) g. Beer h. Diamond rings

> It has often been said that craft unions (electricians, carpenters, etc.) possess considerably greater power to raise wages than do industrial unions (automobile workers, steel workers, etc.). How would you explain this phenomenon in terms of demand elas

> Use the following equation to derive a demand schedule and a demand curve. What types of products might exhibit this type of nonlinear demand curve? Explain. Q = 100P -0.3

> Explain the difference between point elasticity and arc elasticity. What problem can arise in the calculation of the latter, and how is it usually dealt with? In actual business situations, would you expect arc elasticity to be the more useful concept? W

> The U.S. Postal Service has been raising postal rates on a regular basis. The service had been losing money. One of the reasons is increased competition from companies such as United Parcel Service and Federal Express. Another reason is the use of faxes