Question: The county assessor (see Exercise 4) feels

> The following excerpt is from Fortress International Group’s 2012 10-K report filed with the SEC and is a required disclosure: [W]e earned approximately 46% of our total revenue from two customers for the year ended December 31, 2012, and 43% from three

> As your first week at Henley Manufacturing Inc. draws to a close, you find a memorandum on your desk from the company’s CEO. The memo outlines sales and earnings goals for next year: Sales are expected to increase 15% with net income growing by 20%. The

> Novartis AG is a Swiss company that develops, manufactures, and markets pharmaceuticals and vaccines. As of January 2005, European firms, including Novartis, were required to compile their financial reports in accordance with International Financial Repo

> The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: Instruction

> A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31 is as follows: Assume that the Electronics Division received no charges from service departments. The president of Gihbli Industries Inc. h

> E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: The management of E.F. L

> Last Resort Industries Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Specialty Products Division for the past year, assuming no service department charges,

> The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year: 1. Which division is making t

> The Customer Service Department of Door Industries Inc. asked the Publications Department to prepare a brochure for its training program. The Publications Department delivered the brochures and charged the Customer Service Department a rate that was25% h

> The Norsk Division of Gridiron Concepts Inc. has been experiencing revenue and profit growth during the years 20Y6–20Y8. The divisional income statements follow: There are no service department charges, and the division operates as an i

> In teams, visit the website of a company that uses the balanced scorecard to evaluate its performance. Identify the performance measures used by the company on its balanced corecard. For each measure, identify whether the measure best fits the innovation

> Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance using income from operations as a percent of revenues. The follow

> The Eastern District of Adelson Inc. is organized as a cost center. The budget for the Eastern District of Adelson Inc. for the month ended December 31 is as follows (in thousands): Sales salaries ……………………………………………………$ 819,840 System administration sala

> Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems divisions. Condensed divisional income statements, which involve no intracompany transfers and include a breakdown of e

> Sembotix Company has several divisions including a Semiconductor Division that sells semiconductors to both internal and external customers. The company’s X-ray Division uses semiconductors as a component in its final product and is evaluating whether to

> The ARA Railroad owns a piece of land along one of its right-of-ways. The land originally cost ARA $100,000. ARA is considering building a new maintenance facility on this land. ARA determined that the proposal to build the new facility is acceptable if

> Kitchen Helper Company decides to produce and sell food blenders and is considering three different types of production facilities (“plants”). Plant A is a laborintensive facility, employing relatively little specializ

> Define Q as the level of output produced and sold, and suppose that a firm’s total revenue (TR) and total cost (TC) functions can be represented in tabular form as shown here. a. Compute the marginal revenue and average revenue functi

> A manufacturing plant has a potential production capacity of 1,000 units per month (capacity can be increased by 10 percent if subcontractors are employed). The plant is normally operated at about 80 percent of capacity. Operating the plant above this le

> From your knowledge of the relationships among the various cost functions, complete the following table. Q TTC TFC TVC АТС AFC AVC MC 125 - - - 10 - - - - - 20 10.50 30 110 40 255 - 50 60 3 70 - - 80 295

> From your knowledge of the relationships among the various production functions, complete the following table: VARIABLE TOTAL AVERAGE MARGINAL INPUT PRODUCT PRODUCT PRODUCT ТР. (- Q) APL MPL L. 1 8 28 18 | 4 26 | 5 20 6. 108 -10

> US Airways owns a piece of land near the Pittsburgh International Airport. The land originally cost US Airways $375,000. The airline is considering building a new training center on this land. US Airways determined that the proposal to build the new faci

> Despite a decade of subsidies and considerable success in Denmark, Germany, and Britain, renewable energy in the U.S. accounts for only 7 to 8 percent of total energy consumption. Hydroelectric power remains the most successful source of renewable energy

> Ethanol is again viewed as one part of a solution to the problem of shortages of petroleum products. Ethanol is made from a blend of gasoline and alcohol derived from corn or sugarcane. What would you expect the impact of this program to bem on the price

> If the decision to develop and license or wait and imitate in Table 16.6 is a simultaneous-play repeated game between Lucent and Motorola for each new generation of technology, what happens if the Motorola payoff in the southwest cell is positive $2 bill

> An industry produces its product, Scruffs, at a constant marginal cost of $50. The market demand for Scruffs is equal to: Q = 75,000 - 600P a. What is the value to a monopolist who is able to develop a patented process for producing Scruffs at a cost

> Explain how the optimal incentives contract would differ if the less risk-averse bank officer (Dashing in Figure 15.4) had generated the smaller expected profit (i.e., the lower hill-shaped curve). Data from figure 15.4: FIGURE 15.4 Sorting Manager

> In benchmarking sales representatives against one another, what problems arise from continuing to reassign the above-average trade representatives to previously unproductive sales territories?

> General Cereals is using a regression model to estimate the demand for Tweetie Sweeties, a whistle-shaped, sugar-coated breakfast cereal for children. The following (multiplicative exponential) demand function is being used:

> Television channel operating profits vary from as high as 45 to 55 percent at MTV and Nickelodeon down to 12 to 18 percent at NBC and ABC. Provide a Porter Five Forces analysis of each type of network. Why is MTV so profitable relative to the major netwo

> What organizational form would warehouse operators and truck hauling companies adopt?

> How might the lender in Figure 15.2 use knowledge of the type of asset booked by the borrower on its balance sheet to offset the liability for the loan extension? Commercial loan covenants often include a restriction on precisely this balance-sheet decis

> Savings-Mart (a chain of discount department stores) sells patio and lawn furniture. Sales are seasonal, with higher sales during the spring and summer quarters and lower sales during the fall and winter quarters. The company developed the following quar

> If contract promises were not excused because of acts of war, would the clearing and settlements clients of Bank of New York change their behavior? If so, how? What reliance behavior would be considered efficient? What reliance behavior would be consider

> Analyze the pure Nash equilibrium and mixed Nash equilibrium strategies in the following manufacturer–distributor coordination game. How would you recommend restructuring the game to secure higher expected profit for the manufacturer?

> In the Division of a Decaying Business game, what should you offer if the assets at the start of the game are $4 million rather than $3 million? Now is there a first mover or second-mover advantage? Why?

> Suppose an enhanced effectiveness of cooperative advertising occurs if the distributor shares its superior on-the-spot information about current trends in the marketplace with the manufacturer. Explain how each of the following would affect the informati

> The Pear Computer Company just developed a totally revolutionary new personal computer. It estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be: P = 2,500 &aci

> If notorious firm behavior (i.e., defrauding a buyer of high-priced experience goods by delivering low quality) becomes known throughout the marketplace only with a lag of three periods, profits on high-quality transactions remain the same, and interest

> General Medical makes disposable syringes for hospitals and doctor supply companies. The company uses cost-plus pricing and currently charges 150 percent of average variable costs. General Medical learned of an opportunity to sell 300,000 syringes to the

> In the face of stable (or declining) enrollments and increasing costs, many colleges and universities, both public and private, find themselves in progressively tighter financial dilemmas that require basic reexamination of the pricing schemes used by in

> Phillips Industries manufactures a certain product that can be sold directly to retail outlets or to the Superior Company for further processing and eventual sale as a completely different product. The demand function for each of these markets is: Retai

> Cascade Pharmaceuticals Company developed the following regression model, using time-series data from the past 33 quarters, for one of its nonprescription cold remedies: where Y = quarterly sales (in thousands of cases) of the cold remedy X1 = Cascade

> Sort the following products into those priced with two-part tariffs, user charges only, or lump-sum access fees only: pay-per-view movies on cable TV, pay phones, Netflix, iTunes, country club membership, soda from vending machines, laundromats, cell pho

> Explain the concept of maximum sustainable yield for a fishery. Is maximum sustainable yield the most efficient rate of harvest for a renewable natural resource? Is it required to preserve biological diversity?

> Consider again the total revenue and total cost functions shown in tabular form in the previous problem. a. Compute the total, marginal, and average profit functions. b. On a single graph, plot the total profit and marginal profit functions. c. Determine

> Bell Greenhouses has estimated its monthly demand for potting soil to be the following: N = 400 + 4X where N = monthly demand for bags of potting soil X = time periods in months (March 2006 = 0) A

> 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

> 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

> 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.