Managerial Economics

Question 1

Suppose the number of firms you compete with has recently increased. You estimated that as a result of the increased competition, the demand elasticity has increased from –2 to –3, i.e., you face more elastic demand. You are currently charging $10 for your product. If demand elasticity is -3, you should charge [x].

Question 2

An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows:

The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits.

Price ($)

Quantity

Adults

Children

5

15

20

6

14

18

7

13

16

8

12

14

9

11

12

10

10

10

11

9

8

12

8

6

13

7

4

14

6

2

Calculate the price, quantity, and profit if: The amusement park charges a different price in the adult market

Please express your answers for Price and Profit in whole dollars (i.e.10.00)

Please use whole numbers for Quanitity (i.e. 10, 27, 4)

Price

Quantity

Total Revenue

Marginal Revenue

Marginal Cost

Total Cost

MR-MC

Profit

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-a-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-k-_192195630_1"}</span> ) );

84

5.00

30.00

54.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-b-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-l-_192195630_1"}</span> ) );

91

7.00

5.00

35.00

2.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-v-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-c-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-m-_192195630_1"}</span> ) );

96

5.00

5.00

40.00

0.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-w-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-d-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-n-_192195630_1"}</span> ) );

99

3.00

5.00

45.00

-2.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-x-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-e-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-o-_192195630_1"}</span> ) );

100

1.00

5.00

50.00

-4.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-y-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-f-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-p-_192195630_1"}</span> ) );

99

-1.00

5.00

55.00

-6.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-z-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-g-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-q-_192195630_1"}</span> ) );

96

-3.00

5.00

60.00

-8.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-aa-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-h-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-r-_192195630_1"}</span> ) );

91

-5.00

5.00

65.00

-10.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-bb-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-i-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-s-_192195630_1"}</span> ) );

84

-7.00

5.00

70.00

-12.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-cc-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-j-_192195630_1"}</span> ) );

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-t-_192195630_1"}</span> ) );

75

-9.00

5.00

75.00

-14.00

 formCheckList.addElement( new Check_Answer( {ref_label:"4", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-dd-_192195630_1"}</span> ) );

Question 3

An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows:

The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits.

Price ($)

Quantity

Adults

Children

5

15

20

6

14

18

7

13

16

8

12

14

9

11

12

10

10

10

11

9

8

12

8

6

13

7

4

14

6

2

Calculate the price, quantity, and profit if: The amusement park charges a different price in the child's market

Please express your answers for Price and Profit in whole dollars (i.e.10.00)

Please use whole numbers for Quanitity (i.e. 10, 27, 4)

Price

Quantity

Total Revenue

Marginal Revenue

Marginal Cost

Total Cost

MR-MC

Profit

Blank 1 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-a-_192195631_1"}</span> ) );

Blank 2 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-k-_192195631_1"}</span> ) );

52

5.00

20.00

Blank 3 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-u-_192195631_1"}</span> ) );

Blank 4 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-b-_192195631_1"}</span> ) );

Blank 5 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-l-_192195631_1"}</span> ) );

72

10.00

5.00

30.00

5.00

Blank 6 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-v-_192195631_1"}</span> ) );

Blank 7 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-c-_192195631_1"}</span> ) );

Blank 8 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-m-_192195631_1"}</span> ) );

88

8.00

5.00

40.00

3.00

Blank 9 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-w-_192195631_1"}</span> ) );

Blank 10 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-d-_192195631_1"}</span> ) );

Blank 11 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-n-_192195631_1"}</span> ) );

100

6.00

5.00

50.00

1.00

Blank 12 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-x-_192195631_1"}</span> ) );

Blank 13 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-e-_192195631_1"}</span> ) );

Blank 14 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-o-_192195631_1"}</span> ) );

108

4.00

5.00

60.00

-1.00

Blank 15 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-y-_192195631_1"}</span> ) );

Blank 16 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-f-_192195631_1"}</span> ) );

Blank 17 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-p-_192195631_1"}</span> ) );

112

2.00

5.00

70.00

-3.00

Blank 18 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-z-_192195631_1"}</span> ) );

Blank 19 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-g-_192195631_1"}</span> ) );

Blank 20 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-q-_192195631_1"}</span> ) );

112

0.00

5.00

80.00

-5.00

Blank 21 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-aa-_192195631_1"}</span> ) );

Blank 22 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-h-_192195631_1"}</span> ) );

Blank 23 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-r-_192195631_1"}</span> ) );

108

-2.00

5.00

90.00

-7.00

Blank 24 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-bb-_192195631_1"}</span> ) );

Blank 25 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-i-_192195631_1"}</span> ) );

Blank 26 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-s-_192195631_1"}</span> ) );

100

-4.00

5.00

100.00

-9.00

Blank 27 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-cc-_192195631_1"}</span> ) );

Blank 28 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-j-_192195631_1"}</span> ) );

Blank 29 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-t-_192195631_1"}</span> ) );

88

-6.00

5.00

110.00

-11.00

Blank 30 formCheckList.addElement( new Check_Answer( {ref_label:"5", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-dd-_192195631_1"}</span> ) );

Question 4

The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits.

Price ($)

Quantity

Adults

Children

5

15

20

6

14

18

7

13

16

8

12

14

9

11

12

10

10

10

11

9

8

12

8

6

13

7

4

14

6

2

Calculate the price, quantity, and profit if: The amusement park charges the same price in the two markets combined

Please express your answers for Price and Profit in whole dollars (i.e.10.00)

Please use whole numbers for Quanitity (i.e. 10, 27, 4)

Price

Quantity

Total Revenue

Marginal Revenue

Marginal Cost

Total Cost

MR-MC

Profit

Blank 1 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-a-_192195632_1"}</span> ) );

Blank 2 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-k-_192195632_1"}</span> ) );

143

30.00

55.00

Blank 3 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-u-_192195632_1"}</span> ) );

Blank 4 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-b-_192195632_1"}</span> ) );

Blank 5 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-l-_192195632_1"}</span> ) );

168

8.33

5.00

70.00

3.33

Blank 6 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-v-_192195632_1"}</span> ) );

Blank 7 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-c-_192195632_1"}</span> ) );

Blank 8 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-m-_192195632_1"}</span> ) );

187

6.33

5.00

85.00

1.33

Blank 9 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-w-_192195632_1"}</span> ) );

Blank 10 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-d-_192195632_1"}</span> ) );

Blank 11 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-n-_192195632_1"}</span> ) );

200

4.33

5.00

100.00

-0.67

Blank 12 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-x-_192195632_1"}</span> ) );

Blank 13 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-e-_192195632_1"}</span> ) );

Blank 14 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-o-_192195632_1"}</span> ) );

207

2.33

5.00

115.00

-2.67

Blank 15 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-y-_192195632_1"}</span> ) );

Blank 16 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-f-_192195632_1"}</span> ) );

Blank 17 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-p-_192195632_1"}</span> ) );

208

0.33

5.00

130.00

-4.67

Blank 18 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-z-_192195632_1"}</span> ) );

Blank 19 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-g-_192195632_1"}</span> ) );

Blank 20 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-q-_192195632_1"}</span> ) );

203

-1.67

5.00

145.00

-6.67

Blank 21 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-aa-_192195632_1"}</span> ) );

Blank 22 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-h-_192195632_1"}</span> ) );

Blank 23 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-r-_192195632_1"}</span> ) );

192

-3.67

5.00

160.00

-8.67

Blank 24 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-bb-_192195632_1"}</span> ) );

Blank 25 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-i-_192195632_1"}</span> ) );

Blank 26 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-s-_192195632_1"}</span> ) );

175

-5.67

5.00

175.00

-10.67

Blank 27 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-cc-_192195632_1"}</span> ) );

Blank 28 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-j-_192195632_1"}</span> ) );

Blank 29 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-t-_192195632_1"}</span> ) );

152

-7.67

5.00

190.00

-12.67

Blank 30 formCheckList.addElement( new Check_Answer( {ref_label:"6", <span style='word-break:break-all;word-wrap:break-word'>name:"fib_plus-variable-dd-_192195632_1"}</span> ) );

Question 5

Explain the difference in the profit realized under the two situations (the price in each market or in the two markets combined.)

Question 6

Time Warner could offer the History Channel (H) and Showtime (S) individually or as a bundle of both.

Suppose the reservation prices of customers 1 and 2 (the highest prices they are willing to pay) are presented in the boxes below.

The cost to Time Warner is $1 per customer for licensing fees.

Preferences

Showtime

History Chanel

Customer 1

9

2

Customer 2

3

8

Should Time Warner bundle or sell separately?

Question 7

Time Warner could offer the History Channel (H) and Showtime (S) individually or as a bundle of both.

Suppose the reservation prices of customers 1 and 2 (the highest prices they are willing to pay) are presented in the boxes below.

The cost to Time Warner is $1 per customer for licensing fees.

Preferences

Showtime

History Chanel

Customer 1

9

2

Customer 2

3

8

Should Time Warner bundle if everyone likes Showtime more than the History Channel, i.e., preferences are positively correlated?

Question 8

Suppose Time Warner could sell Showtime for $9, and History channel for $8, while making Showtime-History bundle available for $13. Should it use mixed bundling. i.e., sells products both separately and as a bundle?

attachment

8Partquestion.docx