You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number – 10 businesses and 10 academic institutions. Each business customer has the demand function Q = 10 – P, where Q is in millions of seconds per month; each academic institution has the demand Q = 8 – P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? b. Suppose you were unable to keep the two types of customers separate and charged a zero rental fee. What usage fee would maximize your profits? What would be your profits? c. Suppose you set up one two-part tariff – that is, you set one rental and one usage fee that both business and academic customers pay. What usage and rental fees would you set? What would be your profits? Explain why price would not be equal to marginal cost.
> Jennifer and Drew consume orange juice and coffee. Jennifer’s MRS of orange juice for coffee is 1 and Drew’s MRS of orange juice for coffee is 3. If the price of orange juice is $2 and the price of coffee is $3, which market is in excess demand? What do
> Jane has 3 liters of soft drinks and 9 sandwiches. Bob, on the other hand, has 8 liters of soft drinks and 4 sandwiches. With these endowments, Jane’s marginal rate of substitution (MRS) of soft drinks for sandwiches is 4 and Bob’s MRS is equal to 2. Dra
> Using general equilibrium analysis, and taking into account feedback effects, analyze the following: a. The likely effects of outbreaks of disease on chicken farms on the markets for chicken and pork. b. The effects of increased taxes on airline tickets
> Suppose gold (G) and silver (S) are substitutes for each other because both serve as hedges against inflation. Suppose also that the supplies of both are fixed in the short run (QG = 75 and QS = 300) and that the demands for gold and silver are given by
> Suppose that country A and country B both produce wine and cheese. Country A has 800 units of available labor, while country B has 600 units. Prior to trade, country A consumes 40 pounds of cheese and 8 bottles of wine, and country B consumes 30 pounds o
> Some years ago, an article appeared in the New York Times about IBM’s pricing policy. The previous day, IBM had announced major price cuts on most of its small and medium sized computers. The article said: IBM probably has no choice but to cut prices per
> In the context of our analysis of the Edgeworth production box, suppose that a new invention changes a constant-returns-to-scale food production process into one that exhibits sharply increasing returns. How does this change affect the production contrac
> The Acme Corporation produces x and y units of goods Alpha and Beta, respectively. a. Use a production possibility frontier to explain how the willingness to produce more or less Alpha depends on the marginal rate of transformation of Alpha for Beta. b.
> A monopsonist buys labor for less than the competitive wage. What type of inefficiency will this use of monopsony power cause? How would your answer change if the monopsonist in the labor market were also a monopolist in the output market?
> Give an example of conditions when the production possibilities frontier might not be concave.
> In the analysis of an exchange between two people, suppose both people have identical preferences. Will the contract curve be a straight line? Explain. Can you think of a counter example?
> Fill in the missing information in the following tables. For each table, use the information provided to identify a possible trade. Then identify the final allocation and a possible value for the MRS at the efficient solution. (Note: there is more than o
> What is the Net Present Value (NPV) criterion for investment decisions? How does one calculate the NPV of an investment project? If all cash flows for a project are certain, what discount rate should be used to calculate NPV?
> What is the effective yield on a bond? How does one calculate it? Why do some corporate bonds have higher effective yields than others?
> How do investors calculate the net present value of a bond? If the interest rate is 5 percent, what is the present value of a perpetuity that pays $1000 per year forever?
> A firm uses cloth and labor to produce shirts in a factory that it bought for $10 million. Which of its factor inputs are measured as flows and which as stocks? How would your answer change if the firm had leased a factory instead of buying one? Is its o
> Look again at Figure 11.17. Suppose that the marginal costs c1 and c2 were zero. Show that in this case, pure bundling, not mixed bundling, is the most profitable pricing strategy. What price should be charged for the bundle? What will the firm’s profit
> What determines the supply of loanable funds? The demand for loanable funds? What might cause the supply or demand for loanable funds to shift? How would such a shift affect interest rates?
> What is meant by the “user cost” of producing an exhaustible resource? Why does price minus extraction cost rise at the rate of interest in a competitive market for an exhaustible resource?
> How does a consumer trade off current and future costs when selecting an air conditioner or other major appliance? How could this selection be aided by an NPV calculation?
> Suppose you are deciding whether to invest $100 million in a steel mill. You know the expected cash flows for the project, but they are risky – steel prices could rise or fall in the future. How would the CAPM help you select a discount rate for an NPV c
> What is meant by the “market return” in the Capital Asset Pricing Model (CAPM)? Why is the market return greater than the risk-free interest rate? What does an asset’s “beta” measure in the CAPM? Why should high-beta assets have a higher expected return
> How is risk premium used to account for risk in NPV calculations? What is the difference between diversifiable and non diversifiable risk? Why should only non diversifiable risk enter into the risk premium?
> What is the difference between a real discount rate and a nominal discount rate? When should a real discount rate be used in an NPV calculation and when should a nominal rate be used?
> You have noticed that bond prices have been rising over the past few months. All else equal, what does this suggest has been happening to interest rates? Explain.
> You are retiring from your job and are given two options. You can accept a lump sum payment from the company, or you can accept a smaller annual payment that will continue for as long as you live. How would you decide which option is best? What informati
> A bond has two years to mature. It makes a coupon payment of $100 after one year and both a coupon payment of $100 and a principal repayment of $1000 after two years. The bond is selling for $966. What is its effective yield?
> Look again at Figure 11.12, which shows the reservation prices of three consumers for two goods. Assuming that marginal production cost is zero for both goods, can the producer make the most money by selling the goods separately, by using pure bundling,
> Suppose the interest rate is 10 percent. What is the value of a coupon bond that pays $80 per year for each of the next five years and then makes a principal repayment of $1000 in the sixth year? Repeat for an interest rate of 15 percent.
> You are offered the choice of two payment streams: (a) $150 paid one year from now and $150 paid two years from now; (b) $130 paid one year from now and $160 paid two years from now. Which payment stream would you prefer if the interest rate is 5 perc
> Suppose the interest rate is 10 percent. If $100 is invested at this rate today, how much will it be worth after one year? After two years? After five years? What is the value today of $100 paid one year from now? Paid two years from now? Paid five years
> A consumer faces the following decision: She can buy a computer for $1000 and $10 per month for Internet access for three years, or she can receive a $400 rebate on the computer (so that its cost is $600) but agree to pay $25 per month for three years fo
> Suppose you can buy a new Toyota Corolla for $20,000 and sell it for $12,000 after six years. Alternatively, you can lease the car for $300 per month for three years and return it at the end of the three years. For simplification, assume that lease payme
> Reexamine the capital investment decision in the disposable diaper industry (Example 15.3) from the point of view of an incumbent firm. If P&G or Kimberly-Clark were to expand capacity by building three new plants, they would not need to spend $60 millio
> You are planning to invest in fine wine. Each case costs $100, and you know from experience that the value of a case of wine held for t years is 100t1/2. One hundred cases of wine are available for sale, and the interest rate is 10 percent. a. How many c
> Suppose your uncle gave you an oil well like the one described in Section 15.8. (Marginal production cost is constant at $10.) The price of oil is currently $20 but is controlled by a cartel that accounts for a large fraction of total production. Should
> Ralph is trying to decide whether to go to graduate school. If he spends two years in graduate school, paying $15,000 tuition each year, he will get a job that will pay $60,000 per year for the rest of his working life. If he does not go to school, he wi
> The market interest rate is 5 percent and is expected to stay at that level. Consumers can borrow and lend all they want at this rate. Explain your choice in each of the following situations: a. Would you prefer a $500 gift today or a $540 gift next yea
> As the owner of the only tennis club in an isolated wealthy community, you must decide on membership dues and fees for court time. There are two types of tennis players. “Serious” players have demand Q1 = 10 – P where Q1 is court hours per week and P is
> Equation (15.5) shows the net present value of an investment in an electric motor factory. Half of the $10 million cost is paid initially and the other half after a year. The factory is expected to lose money during its first two years of operation. If t
> How is a computer company’s demand for computer programmers a derived demand?
> What happens to the demand for one input when the use of a complementary input increases?
> Rock musicians sometimes earn several million dollars per year. Can you explain such large incomes in terms of economic rent?
> Compare the hiring choices of a monopsonistic and a competitive employer of workers. Which will hire more workers, and which will pay the higher wage? Explain.
> Why might a labor supply curve be backward bending?
> Why is a firm’s demand for labor curve more inelastic when the firm has monopoly power in the output market than when the firm is producing competitively?
> A firm uses both labor and machines in production. Explain why an increase in the average wage rate causes both a movement along the labor demand curve and a shift of the curve.
> A small specialty cookie company, whose only variable input is labor, finds that the average worker can produce 50 cookies per day, the cost of the average worker is $64 per day, and the price of a cookie is $1. Is the company maximizing its profit? Expl
> The government wants to encourage individuals on welfare to become employed. It is considering two possible incentive programs: a. Give firms $2 per hour for every individual on welfare who is hired. b. Give each firm that hires one or more welfare wor
> Explain briefly how the U.S. antitrust laws are actually enforced.
> The company tries to offer a wider range of office supplies at lower costs than other retailers by using just-in-time replenishment and tight inventory control systems. It uses information from a demand forecasting system and point-of-sale data to replen
> Companies like DST Systems have recognized the value in Scrum development to their bottom lines, but making the transition from traditional developmental methods to Scrum development can be challenging. DST Systems is a software development company whose
> You may soon hear more about Honam Petrochemical Corporation. Headquartered in Seoul, South Korea, this company manufactures and sells petrochemical products, such as synthetic resins, synthetic industrial materials, such as ethylene glycol and ethylene
> How do business intelligence and business analytics support decision making? 1. Define and describe business intelligence and business analytics. 2. List and describe the elements of a business intelligence environment. 3. List and describe the analytic
> Applebee’s is the largest casual dining chain in the world, with over 1,800 locations throughout the United States and 20 other countries. The menu features beef, chicken, and pork items, as well as burgers, pasta, and seafood. Applebee’s CEO wants to ma
> Describe various ways that knowledge management systems could help firms with sales and marketing or with manufacturing and production.
> Why are information systems vulnerable to destruction, error, and abuse? 1. List and describe the most common threats against contemporary information systems. 2. Define malware and distinguish among a virus, a worm, and a Trojan horse. 3. Define a hacke
> In February 2011, an IBM computer named Watson took on the two most-decorated champions of the game show Jeopardy, Ken Jennings and Brad Rutter. Watson, which was named after IBM’s founder, Thomas J. Watson, won handily. Watson’s achievement represents a
> Colgate-Palmolive Company is the second largest consumer products company in the world, and its products are marketed in over 200 countries and territories. The company had 39,000 employees worldwide and $16 billion in annual revenue in 2010. Colgate has
> What are the principal e-commerce business and revenue models? 1. Name and describe the principal e-commerce business models. 2. Name and describe the e-commerce revenue models.
> Company-sponsored blog: Visit Blue Nile, J.Crew, Circuit City, Black & Decker, Peet’s Coffee & Tea, and Priceline. Determine which would benefit most from adding a company-sponsored blog to the Web site. List the business benefits of the blog. Specify th
> The Internet may not make corporations obsolete, but the corporations will have to change their business models. Do you agree? Why or why not?
> Why is selecting computer hardware and software for the organization an important business decision? What people, organization, and technology issues should be considered when selecting computer hardware and software?
> Visit the Facebook and Twitter pages of Levi’s, Starbucks, or another company of your choice. Describe all of the ways the company is using its presence at these sites for engaging with customers, and their business benefits.
> How do supply chain management systems coordinate planning, production, and logistics with suppliers? 1. Define a supply chain and identify each of its components. 2. Explain how supply chain management systems help reduce the bullwhip effect and how the
> The three Internet titans—Google, Microsoft, and Apple—are in an epic struggle to dominate your Internet experience, and caught in the crossfire are search, music, books, videos, and other media, the device you use to do all of these things, cloud comput
> If a company wants to implement an enterprise application, it had better do its homework. Discuss the implications of this statement.
> Visit the Web sites of Salesforce.com, RightNow, or another competing company offering a cloud-based version of CRM. Then answer the following questions: 1. What CRM capabilities does the company offer? Describe some of the features. 2. Toward what types
> The publishing industry is grappling with disruptive technologies that may transform its business models and the way we buy and read books. What is the impact of the Internet and e-book technology on book and newspaper publishing? Who will win and who wi
> What is the business value of security and control? 1. Explain how security and control provide value for businesses. 2. Describe the relationship between security and control and recent U.S. government regulatory requirements and computer forensics.
> A survey of your firm's IT infastructure has identified a number of security vulnerabilities. Review the data on these vulnerabilities, which can be found in a table in MyMISLab. Use the table to answer the following questions: • Calculate the total numb
> If you were developing a business continuity plan for your company, where would you start? What aspects of the business would the plan address?
> Have you ever purchased antivirus software for your iPhone, Android, or cell phone? Probably not. Many users believe that their iPhones and Androids are unlikely to be hacked into because they think Apple and Google are protecting them from malware apps,
> In July 2010, reports surfaced about a Stuxnet worm that had been targeting Iran’s nuclear facilities. In November of that year, Iran’s President Mahmoud Ahmadinejad publicly acknowledged that malicious software had infected the Iranian nuclear facilitie
> Cloud computing has just begun to take off in the business world. The biggest player in the cloud computing marketplace is one you might not expect: Amazon. Under its Web Services (AWS) division, the company has streamlined cloud computing and made it an
> What are the main telecommunications transmission media and types of networks? 1. Name the different types of physical transmission media and compare them in terms of speed and cost. 2. Define a LAN, and describe its components and the functions of each
> Security isn’t simply a technology issue, it’s a business issue. Discuss.
> BestMed Medical Supplies Corporation sells medical and surgical products and equipment from over 700 different manufacturers to hospitals, health clinics, and medical offices. The company employs 500 people at seven different locations in western and mid
> Should all major retailing and manufacturing companies switch to RFID? Why or why not?
> When you were at work, how minutes (or hours) did you spend on Facebook today? Did you send personal e-mail or visit some sports Web sites? If so, you’re not alone. According to a Nucleus Research study, 77 percent of workers with Facebook accounts use t
> When you were at work, how minutes (or hours) did you spend on Facebook today? Did you send personal e-mail or visit some sports Web sites? If so, you’re not alone. According to a Nucleus Research study, 77 percent of workers with Facebook accounts use t
> What kind of Internet user are you? Do you primarily use the Net to do a little e-mail and look up phone numbers? Or are you online all day, watching YouTube videos, downloading music files, or playing online games? If you have a smartphone, do you use i
> What are the principles of a database management system? 1. Define a database management system (DBMS) and describe how it works and explain how it benefits organizations. 2. Define and compare the logical and a physical view of data. 3. Define and descr
> Your industrial supply company wants to create a data warehouse where management can obtain a single corporate-wide view of critical sales information to identify bestselling products, key customers, and sales trends. Your sales and product information a
> To what extent should end users be involved in the selection of a database management system and database design?
> Michele Witte was one of dozens of parents who lost their children because of the defective design of drop-side cribs. In 1997, Witte’s 10-month-old son Tyler perished when the drop-side rail on his crib came loose, partially detached, and then trapped h
> What’s the best way to find out what your customers want? If you’re a large business with millions of customers, it’s impossible to ask each one face-to-face. But thanks to modern data management and data mining technology, you can “ask” each one by mini
> On April 19, 2011, system administrators at Sony's online gaming service PlayStation Network (PSN), with over 77 million users, began to notice suspicious activity on some of its 130 servers spread across the globe and 50 software programs. The PlayStati
> Look around. On the street, at restaurants, sports events, and stores, you’ll find many people using their smartphones. By 2013, 1.3 billion people will be able to use their mobile phone to do work on the go, and by 2015, 4.4 billion people, which is mor
> What are the major computer hardware, data storage, input, and output technologies used in business? 1. List and describe the various types of computers available to businesses today. 2. Define the client/server model of computing and describe the differ
> Qantas Airways, Australia’s leading airline, faces cost pressures from high fuel prices and lower levels of global airline traffic. To remain competitive, the airline must find ways to keep costs low while providing a high level of customer service. Qant
> Should organizations use software service providers (including cloud services) for all their software needs? Why or why not? What people, organization, and technology factors should be considered when making this decision?
> What kind of Internet user are you? Do you primarily use the Net to do a little e-mail and look up phone numbers? Or are you online all day, watching YouTube videos, downloading music files, or playing online games? If you have a smartphone, do you use i
> Look around. On the street, at restaurants, sports events, and stores, you’ll find many people using their smartphones. By 2013, 1.3 billion people will be able to use their mobile phone to do work on the go, and by 2015, 4.4 billion people, which is mor
> Computer rooms are becoming too hot to handle. Datahungry tasks such as watching videos on demand, downloading music, exchanging photos, and maintaining Web sites require more and more power-hungry machines. Power and cooling costs for data centers have
> How do the value chain and value web models help businesses identify opportunities for strategic information system applications? 1. Define and describe the value chain model. 2. Explain how the value chain model can be used to identify opportunities fo
> Despite aggressive campaigns to attract customers with lower mobile phone prices, Sprint Nextel has been losing large numbers of monthly contract subscribers. Management wants to know why so many customers are leaving Sprint and what can be done to entic
> What are some of the issues to consider in determining whether the Internet would provide your business with a competitive advantage?
> Have you ever purchased antivirus software for your iPhone, Android, or cell phone? Probably not. Many users believe that their iPhones and Androids are unlikely to be hacked into because they think Apple and Google are protecting them from malware apps,
> When we hear "snowboarding," we tend to think of snow-covered slopes, acrobatic jumps, and high-flying entertainment. We don’t usually think of improving business process efficiency. But snowboarding is business for Burton Snowboards, an industry pioneer
