ManagerialEconomicsPart1:1.ThepriceofgoodAgoesup.AsaresultthedemandforgoodBshiftstotheleft.Fromthiswecaninferthat:a.goodAisanormalgood.b.goodBisaninferiorgood.c.goodsAandBaresubstitutes.d.goodsAandBarecomplements.e.noneoftheabove.Choose:d)thedefinitionoscomplements2.Joe'sbudgetlineis15F+45C=900.WhenJoechooseshismostpreferredmarketbasket,hebuys10unitsofC.therefore,healsobuys:a.10unitsofFb.30unitsofFc.50unitsofFd.60unitsofFe.NoneoftheaboveChoose:b)WeassumethatJoewillspendallhisincome.IfC=10,then15F=900–45(10)=450,soF=450/15=30.3.Kimonlybuyscoffeeandcompactdiscs.Coffeecosts$0.60percup,andCDscost$12.00each.Shehas$18perweektospendonthesetwogoods.IfKimismaximizingherutility,hermarginalrateofsubstitutionofcoffeeforCDsis:a.0.05b.20c.18d.1.50e.NoneoftheaboveChoose:a)AtKim'smostpreferredmarketbasket,herMRSequalsthepriceratio(Pcoffee/PCD),whichequals0.6/12or0.05.4.Thebandwagoneffectcorrespondsbesttowhichofthefollowing?a.snobeffect.b.externaleconomy.c.negativenetworkexternality.d.positivenetworkexternality.Choose:d)5.AGiffengooda.isalwaysthesameasaninferiorgood.b.isthespecialsubsetofinferiorgoodsinwhichthesubstitutioneffectdominatestheincomeeffect.c.isthespecialsubsetofinferiorgoodsinwhichtheincomeeffectdominatesthesubstitutioneffect.d.musthaveadownwardslopingdemandcurve.Choose:c)thedefinitionofGiffengood6.AnEngelcurveforagoodhasapositiveslopeifthegoodis:a.aninferiorgood.b.aGiffengood.c.anormalgood.d.a,b,andcaretrue.e.Noneoftheaboveistrue.Choose:c)InferiorandGiffengoodshavenegativelyslopedEngelcurves.7.ThepriceofbeefandquantityofbeeftradedareP*andQ*,respectively.Giventhisinformation,consumersurplusisthearea:a.0BCQ*b.ABCc.ACP*d.CBP*e.0ACQ*Choose:d)Consumersurplusistheareabetweenthedemandlineandtheprice.8.InFigure1,holdingincomeconstant,whatchangemusthaveoccurredtorotatethebudgetlinefromtheoldline(1)tothenewline(2)?Figure1a.ThepriceofCokefellb.Thepriceofpizzafellc.Thepriceofpizzarosed.ThepriceofCokewentupe.bandcChoose:b)Thehorizontalintercept,I/PC,isunchanged,whichimpliesthatPCcouldnothavechanged(holdingincomeconstant).SincetheslopeisPP/PC,theslopechangemeansthatthepriceofpizzamusthavefallen.ThiscanalsobeseenintuitivelyfromFigure1,sincetheconsumercannowbuymorepizzathanbeforeifhespendsallhisincomeonpizza.9.Andybuys10poundsofonionspermonthwhenthepriceis$0.75perpound.Ifthepricefallsto$0.50perpound,hebuys30poundsofonions.Whatishisarcelasticityofdemandoverthispricerange?a.-1.33b.–2c.–2.5d.-6e.Noneoftheaboveiscorrect.Choose:c)Usingthearcelasticityformula,(1)(2)PizzaCoke5.22)1030(2)75.050.0()75.050.0()1030(QPPQEPThenexttwoquestionsrefertothefollowinginformation:OpieandGomeraretheonlytwoconsumersinthevideocassetterentalmarketintheMayberry.TheirdemandcurvesperweekarepicturedinFigure2.10.Ifrentalscost$2.50each,thetotalquantitydemandedeachweekinthemarketis:a.3b.6c.15d.10e.Noneoftheaboveiscorrect.Choose:b)Addhorizontallytogetthemarketdemandcurve.AtP=$2.50,QO=3andQG=3foratotalof6unitsdemanded.11.Foradecreaseinpricefrom$2.50to$1.50,marketdemandis:a.elastic.b.unitelastic.c.inelastic.d.perfectlyinelastic.e.Moreinformationisneeded.Choose:a)Demandispriceelastic:EP=%ΔQ/%ΔP=[(15-6)/6]/[(2.50-1.50)/2.50]=-3.75(a)Figure2Price($/unit)2.501.5037Quantity(numberofcassettes)COMERDG(b)OPIE2.501.5038Quantity(numberofcassettes)DoPrice($/unit)12.AspresidentandCEOofMegaWorldindustries,youmustdecideonsomeveryri...
