Question: A study of 86 savings and loan

> 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

> Alchem (L) is the price leader in the polyglue market. All 10 other manufacturers (follower [F] firms) sell polyglue at the same price as Alchem. Alchem allows the other firms to sell as much as they wish at the established price and supplies the remaind

> 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

> 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

> An estimate of the demand function for household furniture produced the following results: where F = furniture expenditures per household Y = disposable personal income per household R = value of private residential construction per household P = ra

> 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