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Chapter 9—Applications of Cost Theory
MULTIPLE CHOICE
- Evidence from empirical studies of short-run cost-output relationships lends support to the:
- The short-run cost function is:
- Theoretically, in a long-run cost function:
- Break-even analysis usually assumes all of the following except:
- What is another term meaning the degree of operating leverage?
- In a study of banking by asset size over time, we can find which asset sizes are tending to become more prominent. The size that is becoming more predominant is presumed to be least cost. This is called:
- George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000. If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year.
- In determining the shape of the cost-output relationship only ____ depreciation is relevant.
- Which of the following is not a limitation of the survivor technique for measuring the optimum size of firms within an industry?
- The primary disadvantage of engineering methods for measuring cost functions is that they deal with the managerial and entrepreneurial aspects of the production process or plant.
- A linear total cost function implies that:
- A ____ total cost function implies that marginal costs ____ as output is increased.
- A ____ total cost function implies that marginal costs ____ as output is increased.
- A ____ total cost function yields a U-shaped average total cost function.
- In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as:
- Which of the following is not an assumption of the linear breakeven model:
- In the linear breakeven model, the breakeven sales volume (in dollars) is equal to fixed costs divided by:
- The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change in ____.
- The linear breakeven model excludes ____ from the analysis.
- In the linear breakeven model, the relevant range of output is that range where the linearity assumptions of the model are assumed to hold.
- In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by:
- In the linear breakeven model, a firm incurs operating losses whenever output is less than the breakeven level.
PROBLEMS
- For each of the following cost-output relationships, describe the shape (U-shape, decreasing, increasing, constant) of the average total cost and marginal cost functions (C = total cost, Q = output):
- Offshore Petroleum’s fixed costs are $2,500,000 and its debt repayment requirements are $1,000,000. Selling price per barrel of oil is $18 and variable costs per barrel are $10.
Chapter 10—Prices, Output, and Strategy: Pure and Monopolistic Competition
MULTIPLE CHOICE
- The main difference between perfect competition and monopolistic competition is:
- Long distance telephone service has become a competitive market. The average cost per call is $0.05 a minute, and it’s declining. The likely reason for the declining price for long distance service is:
- What is the profit maximization point for a firm in a purely competitive environment?
- All of the following are true for both competition and monopolistic competition in the long run, except one of them. Which is it?
- Which of the following statements is (are) true concerning a pure competition situation?
- In pure competition:
- In the short-run for a purely competitive market, a manufacturer will stop production when:
- In the purely competitive case, marginal revenue (MR) is equal to:
- In long-run equilibrium, all firms in a pure competition market situation operating under a condition of certainty will have identical costs even though they may use different production and operation techniques.
- If price exceeds average costs under pure competition, ____ firms will enter the industry, supply will ____, and price will be driven ____.
- A firm in pure competition would shut down when:
- In the long-run, firms in a monopolistically competitive industry will
- Uncertainty includes all of the following except ____.
- Experience goods are products or services
- Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will
- All of the following are mechanisms which reduce the adverse selection problem except ____.
- Asset specificity is largest when
- Under asymmetric information,
- To escape adverse selection and elicit high quality experience goods buyers can
- The problems of asymmetric information exchange arise ultimately because
- The market for “lemons” is one in which
- The fraudulent delivery of low quality experience goods at high prices is more likely if
- An “experience good” is one that:
- A “search good” is:
- The price for used cars is well below the price of new cars of the same general quality. This is an example of:
PROBLEMS
- Sunrise Juice Company sells its output in a perfectly competitive market. The firm’s total cost function is given in the following schedule:
- Superior Metals Company has seen its sales volume decline over the last few years as the result of rising foreign imports. In order to increase sales (and hopefully, profits), the firm is considering a price reduction on luranium–a metal that it produces and sells. The firm currently sells 60,000 pounds of luranium a year at an average price of $10 per pound. Fixed costs of producing luranium are $250,000. Current variable costs per pound are $5. The firm has determined that the variable cost per pound could be reduced by $.50 if production volume could be increased by 10 percent (fixed costs would remain constant). The firm’s marketing department has estimated the arc elasticity of demand for luranium to be −1.5.
Chapter 11—Price and Output Determination: Monopoly and Dominant Firms
MULTIPLE CHOICE
- Unique Creations has a monopoly position in magnometers. If the marginal cost for a magnometer is $50 and the price elasticity for magnometers is -4, what is the optimal monopoly price?
- Land’s End estimates a demand curve for turtleneck sweaters to be:
- Declining cost industries
- A monopolist seller of Irish ceramics faces the following demand function for its product: P = 62 - 3Q. The fixed cost is $10 and the variable cost per unit is $2. What is the maximizing QUANTITY for this monopoly
- Globo Public Supply has $1,000,000 in assets. Its demand curve is: P = 206 - .20•Q and its total cost function is: TC = 20,000 + 6•Q where TC excludes the cost of capital. If Globo Public Supply is UNREGULATED, find Globo’s optimal price.
- A monopolist faces the following demand curve: P = 12 - .3Q with marginal costs of $3. What is the monopolistic PRICE?
- In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale. If price were set equal to marginal cost, then:
- The profit-maximizing monopolist, faced with a negative-sloping demand curve, will always produce:
- In the case of pure monopoly:
- A monopoly will always produce less than a purely competitive industry, ceteris paribus.
- The demand curve facing the firm in ____ is the same as the industry demand curve.
- When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation.
- Of the following, which is not an economic rationale for public utility regulation?
- The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of:
- In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users. But contrary to price discrimination, large industrial users generally are charged ____ rates.
- ____ as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility’s plant over a larger number of units of output.
- Regulatory agencies engage in all of the following activities except _______.
PROBLEMS
- The Zinger Company manufactures and sells a line of sewing machines. Demand per period (Q) for a particular model is given by the following relationship:
- Zar Island Gas Company is the sole producer of natural gas in the remote island country of Zar. The company’s operations are regulated by the State Energy Commission. The demand function for gas in Zar has been estimated as:
MULTIPLE CHOICE
- “Conscious parallelism of action” among oligopolistic firms is an example of ____.
- The kinked demand curve model was developed to help explain:
- An oligopoly is characterized by:
- Which of the following is an example of an oligopolistic market structure?
- In the Cournot duopoly model, each of the two firms, in determining its profit-maximizing price-output level, assumes that the other firm’s ____ will not change.
- If a cartel seeks to maximize profits, the market share (or quota) for each firm should be set at a level such that the ____ of all firms is identical.
- In the absence of any legally binding enforcement mechanism, individual cartel producers may find it advantageous to cheat on the agreements and engage in secret price concessions.
- A(n) ____ is characterized by a relatively small number of firms producing a product.
- The distinctive characteristic of an oligopolistic market structure is that there are recognizable interdependencies among the decisions of the firms.
- Factors that affect the ability of oligopolistic firms to successfully engage in cooperation include ____.
- Effective oligopolistic collusion is more likely to occur when customer orders are small, frequent, and received on a regular basis as compared with large orders that are received infrequently at irregular intervals.
- Effective collusion generally is more difficult as the number of oligopolistic firms involved increases.
- The largest problem faced in cartel pricing agreements such as OPEC is:
- Some market conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion more successful?
- Even ideal cartels tend to be unstable because
- Suppose that in a perfectly competitive industry the equilibrium industry quantity is 10,000 units. Suppose that the monopoly output is 5,000. For a2-firm Cournot Oligopoly (N =2) known as a duopoly, what is a likely Cournot QUANTITY for the industry?
- A cartel is a situation where firms in the industry
- In a kinked demand market, whenever one firm decides to lower its price,
- Barometric price leadership exists when
- Some industries that have rigid prices. In those industries, we tend to
PROBLEMS
- Two companies (A and B) are duopolists that produce identical products. Demand for the products is given by the following demand function:
- Two companies (A and B) are duopolists that produce identical products. Demand for the products is given by the following demand function:
- The Winston Tobacco Company feels that it is faced with the following segmented demand function for its cigarettes:
MULTIPLE CHOICE
- In ____ 2-person, nonzero-sum games there is no communication between the participants and no way to enforce agreements.
- A strategy game is
- Essential components of a game include all of the following except:
- In a zero-sum game
- When airlines post prices on an electronic bulletin board at 8:00 a.m. each morning, the decision-makers are engaged in
- The starting point of many methods for predicting equilibrium strategy in sequential games is
- Consider the game known as the Prisoner’s Dilemma. What’s the dilemma?
- When there is an Equilibrium (or a Nash Equilibrium), we expect that:
- The Prisoner’s Dilemma involves two spies who are held in separate soundproof rooms. But even if the two spies could communicate, what makes it difficult for them to achieve the cooperative solution (both not confessing)?
- When there is no Equilibrium (or no Nash Equilibrium), we expect that:
- In a game, a dominated strategy is one where:
- If two firms operate in a market that is characterized as being a Prisoner’s Dilemma, and the two strategies given them are to restrict output or expand output, which of the following strategy pairs would represent the cooperative solution in a duopoly for firm 1 and firm 2, and firm 1 given first in each pair?
- A key to analyzing subgame perfect equilibrium strategy in sequential games is
- Credibility in threats and commitments in sequential games is based on
- In making promises that are not guaranteed by third parties and in imposing penalties that are not enforced by third parties, all of the following are credibility-enhancing mechanisms except
- The difference between cooperative and non-cooperative games is
- An illustration of a non-credible commitment is the promise
- A dominant strategy differs from a Nash equilibrium strategy in that
- In adopting mixed Nash equilibrium strategy, a player is attempting to
- To trust a potential cooperator until the first defection and then never cooperate thereafter is
- Non-cooperative sequential games can incorporate all the following features except
- If one-time gains from defection are always less than the discounted present value of an infinite time stream of cooperative payoffs at some given discount rate, the decision-makers have escaped
- The chain store paradox of an incumbent who accommodates a finite stream of potential entrants threatening to enter sequentially numerous markets illustrates
- Cooperation in repeated prisoner’s dilemma situations seems to be enhanced by all of the following except
- Credible promises and hostage mechanisms can support a continuous stream of cooperative exchanges except when
PROBLEMS
Exhibit 13-1
Consider the information below when answering the following question(s):
- In choosing whether to deliver to six or seven neighborhoods, Pizza Spinners has to take into account not only its own costs, but also the delivery area response of its competitor Harry’s Pizzeria. If the payoffs per week from delivering in six and seven neighborhoods are as displayed in the exhibit above, what will Pizza Spinner’s choose and why?
- In choosing whether to deliver to six or seven neighborhoods, Harry’s Pizzeria has to take into account not only its own costs but the delivery area response of its competitor Pizza Spinners. If the payoffs per week from delivering in six and seven neighborhoods are as displayed in Exhibit 13-1, what will Harry’s Pizzeria choose and why?
- If the city-pair route from Orlando to New Orleans is served by only two air carriers, Northwest and Delta, and if the payoffs from discounting or maintaining high prices are as below, what behavior would you predict for Delta in a one-play game and why?
- Retailers A and B anticipate many repetitions of the following pricing game in which they must choose between discounting or maintaining higher prices. Under what circumstances will store A resist discounting and choose MAINTAIN?
- Suppose a new low cost discount firm must decide in advance between introducing LARGE or SMALL capacity in a licensed cable TV market where the incumbent then will decide on a HIGH or MATCHING pricing response. If the following table describes the payoffs from various combinations of these strategies, what capacity will the new entrant choose and why?
Appendix 13A—Entry Deterrence and Accommodation Games
MULTIPLE CHOICE
- In deciding whether to invest in excess capacity in order to deter entry, incumbents should consider all of the following except
- An inverse intensity customer sorting rule is one in which
- An efficient customer sorting rule is one in which
- All of the following are sunk cost investments that precommit an incumbent to aggressively defend market share and the cash flow prior to threatened entry except
Chapter 14—Pricing Techniques and Analysis
MULTIPLE CHOICE
- The segmenting of customers into several small groups such as household, institutional, commercial, and industrial users, and establishing a different rate schedule for each group is known as:
- Which of the statements about price discrimination is (are) false?
- Which of the following pricing policies best identifies when a product should be expanded, maintained, or discontinued?
- Second-degree price discrimination:
- In ____ price discrimination, the entire consumer surplus is captured by the producer.
- In ____ price discrimination, the monopolist charges each consumer the highest price that purchaser is willing to pay for each unit purchased (provided that this price exceeds the marginal cost of production).
- ____ is a new product pricing strategy which results in a high initial product price. This price is reduced over time as demand at the higher price is satisfied.
- ____ is the price at which an intermediate good or service is transferred from the selling to the buying division within the same firm.
- For a monopolist that engages in price discrimination, when the price elasticity in market 1 is less (in absolute value) than in market 2, the optimal price in market 1 will exceed the optimal price in market 2.
- To maximize profits, a monopolist that engages in price discrimination must allocate output in such a way as to make identical the ____ in all markets.
- Barbers give a price discount to kids. According to price discrimination, if barbers use price discrimination, this implies demand for hair cuts by kids is more elastic.
- Third-degree price discrimination exists whenever:
- The following are possible examples of price discrimination, EXCEPT:
- Firms that have a cover charge for their customers and charge for each item they purchase as well are exhibiting
- A manufacturer produces two types of computer software, Word processing (W) and Spreadsheet (S), which is offered to two different retail outlets (#1 and #2). The following table shows the maximum price each retail outlet is willing to pay for each individual software product.
- Vacation tours to Europe invariably package visits to disparate regions: cities, mountains, and the seaside. Bundling, a type of second degree price discrimination, is most profitable when:
- The optimal mark-up is: m = -1/ (E+1). When the mark-up on cookware equals 50%, then demand elasticity (E) for cookware is:
- [Advanced Material] Cross functional revenue management examines capacity, pricing, and customer account management in order to maximize revenue.
Capacity Planning
Pricing Customer Account Management
If the MegaPlex Movie Theater finds that too often they have to turn customers away from their theaters at peak movie times for blockbusters creating too much slippage, cross functional revenue management suggests:
- [Advanced Material] Restaurants try to buy just enough fish to match the expected walk-ins and reservations. If they buy a lot more fish, in the language of revenue management:
- [Advanced Material] If an airline company decides to buy smaller jets with fewer seats, then the problem of:
a. 21. [Advanced Material] If airlines found that the number of no-shows starts to increase, then its policy for optimal overbooking would tend to:
PROBLEM
1. Consolidated Salt Company sells table salt to both retail grocery chains and commercial users (e.g., bakeries, snack food makers, etc.). The demand function for each of these markets is:
MULTIPLE CHOICE
- Non-redeployable durable assets that are dependent upon unique complementary and perfectly redeployable assets to achieve substantial value-added will typically be organized as
- Vertical integration may be motivated by all of the following except:
- Contracts are distinguished from tactical alliances by which of the following characteristics:
- When manufacturers and distributors establish credible commitments to one another, they often employ
- Which of the following is not among the functions of contract?
- Buying electricity off the freewheeling grid at one quarter ‘til the hour for delivery on the hour illustrates:
- When someone contracts to do a task but fails to put full effort into the performance of an agreement, yet the lack of effort is not independently verifiable, this lack of effort constitutes a
- When retail bicycle dealers advertise and perform warranty repairs but do not deliver the personal selling message that Schwinn has designed as part of the marketing plan but cannot observe at less than prohibitive cost, the manufacturer has encountered a problem of ____.
- Which of the following are not approaches to resolving the principal-agent problem?
- To accomplish its purpose a linear profit-sharing contract must
- Mac trucks and their dealers would likely have an organizational form of
- Reliant assets are always all of the following except:
- Governance mechanisms are designed
- When borrowers who do not intend to repay are able to hide their bad credit histories, a lender’s well-intentioned borrowers should
- Each of the following is an example of moral hazard in which people modify their behavior in an opportunistic way, often frustrating the intent of governmental or management policies. Which is NOT an example of moral hazard?
- Agency problems appear in many settings within a firm. All of the following are examples, except which is NOT a good example of this problem?
PROBLEMS
- Cooperative agreements between manufacturers and retailers concerning retail promotion and manufacturer advertising are often the key to the success of new products. Analyze the following sequential product promotion game, and then predict 1) whether the product will be updated by the manufacturer (Man), 2) whether the retail distributor (RET) will promote the product, and 3) whether the manufacturer will advertise the product. No explanation necessary.
- In the following sequential marketing game, is a threat by the manufacturer (Man) not to advertise a newly updated product unless the retailer (RET) promotes it a credible threat?
Appendix 15A—Auction Design and Information Economics
MULTIPLE CHOICE
- Common value auctions with open bidding necessarily entail
- An incentive-compatible mechanism for revealing true willingness to pay in a private value auction is
- In comparing rules for serving a queue, last-come first-served has all of the following effects except
- The principal advantage of an open bidding system for allocating telecommunications spectrum licenses was
- A Dutch auction implies all of the following except
- Each partner in a simple profit-sharing contract that splits the independently verifiable sales revenue minus unobservable cost has an incentive
- An optimal incentives contract can induce the revelation of true costs in a partnership by
- An incentive-compatible revelation mechanism is
- Incentive-compatible revelation mechanisms attempt to
- Revenue equivalence theorem refers to equal seller revenue in which of the following pairs:
- In Dutch auctions, the bidding
- Winning an auction can be exhilarating, but it can also lead to doubt as to whether you did the right thing or not. This is called:
- Suppose that a private firm wants to go public to give the owners a chance to retire. It follows the lead of the Google IPO by using a modified Vickrey (or uniform price) auction. The owners of the firm plans to sell 1 million shares and hope to raise at least $10 million from the auction. The following bids were submitted.
- Auctions are used in place of markets when the items traded are unique (e.g., a Ming vase or a right to drill for oil). Which of the following examples are typically sold using Vickrey auction methods?
- Sealed bids can be used in multiple rounds. How is this done?
- Research suggests that an auction for a private value item will yield the HIGHEST payout if:
PROBLEMS
- If two art dealers bidding for a Picasso receive the following forecast information about the chance of a forgery which with previously unknown Picasso paintings is present 8 times in 10 historically, what is the amount by which strategic underbidding could be reduced if ten bidders were attracted to the auction?
Exhibit 15A-1
Suppose GM and Nucor Steel seek to develop jointly a new sheet metal and auto body stamping machine, and each party knows the payoffs in the following table of equi-probable outcomes but cannot independently verify one another’s costs. Both GM and Nucor can cancel the project and both will then earn $0 if the cost revelations give early warning of losses.
- Refer to Exhibit 15A-1.
Part A: What is the incentive-compatible revelation mechanism that will induce true revelation of the asymmetric cost information and maximize the value of the partnership?
- Refer to Exhibit 15A-1.
Part B: What are the expected net profits to each partner under the incentives contract?
- Refer to Exhibit 15A-1.
Part C: What is the expected net profit under the simple profit sharing contract, and why would the partners adopt an incentive-compatible revelation mechanism (i.e., an optimal incentives contract)?
- What are the expected net profits to Johnson & Johnson in a pharmaceutical R&D joint venture with Amgen given the following joint profit payoffs. The joint profit payoffs are the difference between $180 and the sum of the cost realizations. Assume that the three columns are equally likely to occur, each row is equally likely to occur. Both Johnson and Johnson and Amgen can cancel the project and both will then earn $0 if the cost revelations give early warning of losses.
Chapter 16—Government Regulation
MULTIPLE CHOICE
- Patents have been defended by some on the grounds that they stimulate inventive activity. Others have argued for changes in current patent laws because:
- The Sherman Act prohibits:
- The sentiment for increased deregulation in the late 1970’s and early 1980’s has been felt most significantly in the price regulation of
- Which of the following public policies has (have) the effect of restricting competition?
- The concept of market structure refers to three main characteristics of buyers and sellers in a particular market. These include ____.
- The concept of market conduct includes such things as ____.
- ____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model.
- The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model.
- The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.
- The ____ is equal to the some of the squares of the market shares of all the firms in an industry.
- Industry A has market shares of 50, 30, and 20. Industry B has market shares of 45, 40, and 15. Hint: HHI = (si2), where si is the market shares of the i-th firm in the industry.
- The antitrust laws regulate all of the following business decisions except ____.
- ____ occurs whenever a third party receives or bears costs arising from an economic transaction in which the individual (or group) is not a direct participant.
- The Coase Theorem works best in places that transaction costs for contracts among people is low. Often in the world of torts and externalities both parties can claim that they have rights to impose on others. One case is that of a railroad that is noisy and scares the cattle and the rancher whose cattle sometimes wander in front of moving trains causing damage to them and the train. What does the Coase say would happen?
Chapter 17—Long-Term Investment Analysis
MULTIPLE CHOICE
- Capital expenditures:
- Any current outlay that is expected to yield a flow of benefits beyond one year in the future is:
- If the acceptance of Project A makes it impossible to accept Project B, these projects are:
- Which of the following is (are) a guideline(s) to be used in the estimation of cash flows?
- In order to help assure that all relevant factors will be considered, the capital-expenditure selection process should include the following steps except:
- Which of the following would not be classified as a capital expenditure for decision-making purposes?
- The decision by the Municipal Transit Authority to either refurbish existing buses, buy new large buses, or to supplement the existing fleet with mini-buses is an example of:
- Which of the following is (are) a basic principle(s) when estimating a project’s cash flows?
- Which of the following items is (are) not considered as part of the net investment calculation?
- The relationship between NPV and IRR is such that :
- Project post-audit reviews are rarely of practical value because capital investments are sunk, irreversible costs.
- The cost of capital can be thought of as the rate of return required by investors in the firm’s securities.
- In cost of capital calculations, the flotation cost on new debt is usually ignored because the flotation cost percentage for large debt issues is relatively lo
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Chapter 1—Introduction and Goals of the Firm
MULTIPLE CHOICE
- The form of economics most relevant to managerial decision-making within the firm is:
- If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the change in total revenue resulting from a decision, any business decision is profitable if:
- In the shareholder wealth maximization model, the value of a firm’s stock is equal to the present value of all expected future ____ discounted at the stockholders’ required rate of return.
- Which of the following statements concerning the shareholder wealth maximization model is (are) true?
- According to the profit-maximization goal, the firm should attempt to maximize short-run profits since there is too much uncertainty associated with long-run profits.
- According to the innovation theory of profit, above-normal profits are necessary to compensate the owners of the firm for the risk they assume when making their investments.
- According to the managerial efficiency theory of profit, above-normal profits can arise because of high-quality managerial skills.
- Which of the following (if any) is not a factor affecting the profit performance of firms:
- Agency problems and costs are incurred whenever the owners of a firm delegate decision-making authority to management.
- Economic profit is defined as the difference between revenue and ____.
- Income tax payments are an example of ____.
- Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth. These include:
- The common factors that give rise to all principal-agent problems include the
- The Saturn Corporation (once a division of GM) was permanently closed in 2009. What went wrong with Saturn?
- A Real Option Value is:
- Which of the following will increase (V0), the shareholder wealth maximization model of the firm:
V0∙(shares outstanding) = t=1(t ) / (1+ke)t + Real Option Value.
- The primary objective of a for-profit firm is to ___________.
- Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:
- The flat-screen plasma TVs are selling extremely well. The originators of this technology are earning higher profits. What theory of profit best reflects the performance of the plasma screen makers?
- To reduce Agency Problems, executive compensation should be designed to:
- Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women. The new frequency recommendation was designed to address the family histories of the patients. The optimal frequency should be where the marginal benefit of an additional pap-test:
Chapter 2
- A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.
- The level of an economic activity should be increased to the point where the ____ is zero.
- The net present value of an investment represents
- Generally, investors expect that projects with high expected net present values also will be projects with
- An closest example of a risk-free security is
- The standard deviation is appropriate to compare the risk between two investments only if
- The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)
- Based on risk-return tradeoffs observable in the financial marketplace, which of the following securities would you expect to offer higher expected returns than corporate bonds?
- The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:
- The ____ is the ratio of ____ to the ____
- Sources of positive neesent value projects include
- Receiving $100 at the end of the next three years is worth more to me than receiving $260 right now, when my required interest rate is 10%
- The number of standard deviations z that a particular value of r is from the mean ȓ can be computed as z = (r - ȓ)/ Suppose that you work as a commission-only insurance agent earning $1,000 per week on average. Suppose that your standard deviation of weekly earnings is $500. What is the probability that you zero in a week? Use the following brief z-table to help with this
- Consider an investment with the following payoffs and probabilities
- Consider an investment with the following payoffs and probabilities:
- An investment advisor plans a portfolio your 85 year old risk-averse grandmother. Her portfolio currently consists of 60% bonds and 40% blue chip stocks. This portfolio is estimated to have an expected return of 6% and with a standard deviation 12%. What is the probability that she makes less than 0% in a year? [A portion of Appendix B1 is given below, where z = (x - with as the mean and as the standard deviation.]
- Two investments have the following expected returns (net present values) and standard deviations
PROBLEMS
- Suppose that the firm’s cost function is given in the following schedule (where Q is the level of output):
- Complete the following table.
- A firm has decided to invest in a piece of land. Management has estimated that the land can be sold in 5 years for the following possible prices:
Chapter 3—Demand Analysis
MULTIPLE CHOICE
- Suppose we estimate that the demand elasticity for fine leather jackets is .7 at their current prices. Then we know that:
- If demand were inelastic, then we should immediately
- In this problem, demonstrate your knowledge of percentage rates of change of an entire demand function (HINT: %Q = EP•%P + EY•%Y). You have found that the price elasticity of motor control devices at Allen-Bradley Corporation is -2, and that the income elasticity is a +1.5. You have been asked to predict sales of these devices for one year into the future. Economists from the Conference Board predict that income will be rising 3% over the next year, and AB’s management is planning to raise prices 2%. You expect that the number of AB motor control devices sold in one year will:
4 A linear demand for lake front cabins on a nearby lake is estimated to be: QD = 900,000 - 2P. What is the pointprice elasticity for lake front cabins at a price of P = $300,000?
- Property taxes are the product of the tax rate (T) and the assessed value (V). The total property tax collected in your city (P) is: P = T•V. If the value of properties rise 4% and if Mayor and City Council reduces the property the tax rate by 2%, what happens to the total amount of property tax collected? [HINT: the percentage rate of change of a product is approximately the sum of the percentage rates of change.}
- Demand is given by QD = 620 10•P and supply is given by QS = 100 + 3•P. What is the price and quantity when the market is in equilibrium?
- Which of the following would tend to make demand INELASTIC?
- Which of the following best represents management’s objective(s) in utilizing demand analysis?
- Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.
- An increase in the quantity demanded could be caused by:
- Iron ore is an example of a:
- If the cross price elasticity measured between items A and B is positive, the two products are referred to as:
- When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded, the net result being a constant total consumer expenditure.
- Marginal revenue (MR) is ____ when total revenue is maximized.
- The factor(s) which cause(s) a movement along the demand curve include(s):
- An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except
- Producers’ goods are:
- The demand for durable goods tends to be more price elastic than the demand for non-durables.
- A price elasticity (ED) of 1.50 indicates that for a ____ increase in price, quantity demanded will ____ by ____.
- Those goods having a calculated income elasticity that is negative are called:
- An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.
- When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues
- Empirical estimates of the price elasticity of demand [in Table 3.4] suggest that the demand for household consumption of alcoholic beverages is
PROBLEM
- The manager of the Sel-Rite drug store accidentally mismarked a shipment of 20-pound bags of charcoal at $4.38 instead of the regular price of $5.18. At the end of a week, the store’s inventory of 200 bags of charcoal was completely sold out. The store normally sells an average of 150 bags per week.
- The Future Flight Corporation manufactures a variety of Frisbees selling for $2.98 each. Sales have averaged 10,000 units per month during the last year. Recently Future Flight’s closest competitor, Soaring Free Company, cut its prices on similar Frisbees from $3.49 to $2.59. Future Flight noticed that its sales declined to 8,000 units per month after the price cut.
- The British Automobile Company is introducing a brand new model called the “London Special.” Using the latest forecasting techniques, BAC economists have developed the following demand function for the “London Special”:
- Hanna Corporation markets a compact microwave oven. In 2010 they sold 23,000 units at $375 each. Per capita disposable income in 2010 was $6,750. Hanna economists have determined that the arc price elasticity for this microwave oven is 1.2.
Chapter 4—Estimating Demand
MULTIPLE CHOICE
- Using a sample of 100 consumers, a double-log regression model was used to estimate demand for gasoline. Standard errors of the coefficients appear in the parentheses below the coefficients.
- In a cross section regression of 48 states, the following linear demand for per-capita cans of soda was found:
- A study of expenditures on food in cities resulting in the following equation:
- All of the following are reasons why an association relationship may not imply a causal relationship except
- In regression analysis, the existence of a significant pattern in successive values of the error term constitutes:
- In regression analysis, the existence of a high degree of intercorrelation among some or all of the explanatory variables in the regression equation constitutes:
- When using a multiplicative power function (Y = a X1b1 X2b2 X3b3) to represent an economic relationship, estimates of the parameters (a, and the b’s) using linear regression analysis can be obtained by first applying a ____ transformation to convert the function to a linear relationship.
- The correlation coefficient ranges in value between 0.0 and 1.0.
- The coefficent of determination ranges in value between 0.0 and 1.0.
- The coefficient of determination measures the proportion of the variation in the independent variable that is “explained” by the regression line.
- The presence of association between two variables does not necessarily imply causation for the following reason(s):
- The estimated slope coefficient (b) of the regression equation (Ln Y = a + b Ln X) measures the ____ change in Y for a one ____ change in X.
- The standard deviation of the error terms in an estimated regression equation is known as:
- In testing whether each individual independent variables (Xs) in a multiple regression equation is statistically significant in explaining the dependent variable (Y), one uses the:
- One commonly used test in checking for the presence of autocorrelation when working with time series data is the ____.
- The method which can give some information in estimating demand of a product that hasn’t yet come to market is:
- Demand functions in the multiplicative form are most common for all of the following reasons except:
- The Identification Problem in the development of a demand function is a result of:
- Consider the following linear demand function where QD = quantity demanded, P = selling price, and Y = disposable income:
- Consider the following multiplicative demand function where QD = quantity demanded, P = selling price, and Y = disposable income:
- One shortcoming of the use of ____ in demand analysis is that the participants are generally aware that their actions are being observed and hence they may seek to act in a manner somewhat different than normal.
- The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:
- Novo Nordisk A/S, a Danish firm, sells insulin and other drugs worldwide.Activella, an estrogen and progestin hormone replacement therapy sold by Novo-Nordisk, is examined using 33 quarters of data
Y = -204 + . 34X1 - .17X2
(17.0) (-1.71)
Where Y is quarterly sales of Activella, X1 is the Novo’s advertising of the hormone therapy, and X2 is advertising of a similar product by Eli Lilly and Company, Novo-Nordisk’s chief competitor. The parentheses contain t-values. Addition information is: Durbin-Watson = 1.9 and R2 = .89.
Using the data for Novo-Nordisk, which is correct?
- In which of the following econometric problems do we find Durbin-Watson statistic being far away from 2.0?
- When there is multicollinearity in an estimated regression equation,
- When two or more “independent” variables are highly correlated, then we have:
- Which is NOT true about the coefficient of determination?
PROBLEMS
- Phoenix Lumber Company uses the number of construction permits issued to help estimate demand (sales). The firm collected the following data on annual sales and number of construction permits issued in its market area:
- Lenny’s, a national restaurant chain, conducted a study of the factors affecting demand (sales). The following variables were defined and measured for a random sample of 30 of its restaurants:
- The following demand function has been estimated for Fantasy pinball machines
- Given the following demand function:
Q = 2.0 P1.33 Y2.0 A.50
Chapter 5—Business and Economic Forecasting
MULTIPLE CHOICE
- Time-series forecasting models:
- The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:
- The use of quarterly data to develop the forecasting model Yt = a +bYt1 is an example of which forecasting technique?
- Variations in a time-series forecast can be caused by:
- The variation in an economic time-series which is caused by major expansions or contractions usually
of greater than a year in duration is known as:
- The type of economic indicator that can best be used for business forecasting is the:
- Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?
- In the first-order exponential smoothing model, the new forecast is equal to a weighted average of the old forecast and the actual value in the most recent period.
- Simplified trend models are generally appropriate for predicting the turning points in an economic time series.
- Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.
- Seasonal variations can be incorporated into a time-series model in a number of different ways, including:
- For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?
- Which of the following barometric indicators would be the most helpful for forecasting future sales for an industry?
- An example of a time series data set is one for which the
- Examine the plot of data.
- Emma uses a linear model to forecast quarterly same-store sales at the localGardenCenter. The results of her multiple regression is
- Select the correct statement.
- If two alternative economic models are offered, other things equal, we would
- Mr. Geppettouses exponential smoothing to predict revenue in his wood carving business. He uses a weight of = .4 for the naïve forecast and (1-) = .6 for the past forecast. What revenue did he predict for March using the data below? Select closet answer.
- Suppose a plot of sales data over time appears to follow an S-shape as illustrated below.
Which of the following is likely that the best forecasting functional form to use for sales data above?
PROBLEM
- The Accuweather Corporation manufactures barometers and thermometers for weather forecasters. In an attempt to forecast its future needs for mercury, Accuweather’s chief economist estimated average monthly mercury needs as:
- Milner Brewing Company experienced the following monthly sales (in thousands of barrels) during 2010:
Chapter 6—Managing Export
MULTIPLE CHOICE
- Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would
- If the British pound (₤) appreciates by 10% against the dollar:
- Purchasing power parity or PPP says the ratios composed of:
- If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetary policy by raising US interest rates next year, what is the likely impact on the value of the dollar
- If the domestic prices for traed goods rises 5% in Japan and rises 7% the US over the same period, what would happened to the Yen/US dollar exchange rate?
- US and Canada can both grow wheat and can do mining. Use the following table to look for which country has a comparative advantage in mining.
- The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions. If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:
- If the value of the U.S. dollar rises from 1.0 per dollar to 1.3 per dollar,
- An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
- In the last twenty-five years, the Yen and German mark and now the Euro have
- In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will
- When a manufacturer’s home currency appreciates substantially,
- An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from
- The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time
- Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because
- European Union labor costs exceed U.S. and British labor costs primarily because
- Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
- In a recession, the trade balance often improves because
PROBLEM
- Suppose nominal interest rates in the U.S. rise from 4.6% to 5% and decline in Britain from 6% to 5.5%, while U.S. consumer inflation remains unchanged at 1.9% and British inflation declines from 4% to 3%. In addition suppose, real growth in the U.S. is forecasted for next year at 4% and in Britain real growth is forecasted at 5%. Finally, suppose producer price inflation in the U.S. is declining from 2% to 1% while in Britain producer price inflation is rising from 2% to 3.2%. Explain what effect each of these factors would have on the long-term trend exchange rate ( per $) and why?
Chapter 7—Production Economics
MULTIPLE CHOICE
- What’s true about both the short-run and long-run in terms of production and cost analysis?
- The marginal product is defined as:
- Fill in the missing data to solve this prolem.
- The following is a Cobb-Douglas production function: Q = 1.75K0.5∙L0.5. What is correct here?
- Suppose you have a Cobb-Douglas function with a capital elasticity of output (α) of 0.28 and a labor elasticity of output (β) of 0.84. What statement is correct?
- The Cobb-Douglas production function is: Q = 1.4L0.6K0.5. What would be the percentage change in output (%∆Q) if labor grows by 3.0% and capital is cut by 5.0%?
- If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?
- The marginal rate of technical substitution may be defined as all of the following except:
- The law of diminishing marginal returns:
- The combinations of inputs costing a constant C dollars is called:
- In a relationship among total, average and marginal products, where TP is maximized:
- Holding the total output constant, the rate at which one input X may be substituted for another input Y in a production process is:
- Which of the following is never negative?
- Concerning the maximization of output subject to a cost constraint, which of the following statements (if any) are true?
- In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:
- Marginal revenue product is:
- The isoquants for inputs that are perfect substitutes for one another consist of a series of:
- In production and cost analysis, the short run is the period of time in which one (or more) of the resources employed in the production process is fixed or incapable of being varied.
- Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____.
- Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.
- The isoquants for inputs that are perfect complements for one another consist of a series of:
- Given a Cobb-Douglas production function estimate of Q = 1.19L.72K.18 for a given industry, this industry would have:
- The primary purpose of the Cobb-Douglas power function is to:
- The original Cobb-Douglas function was given as . It was subsequently rewritten as . What benefit was derived in the revision?
- The Cobb-Douglas production function has which of the following properties?
- In the Cobouglas production function ( ):
PROBLEMS
- Emco Company has an assembly line of fixed size A. Total output is a function of the number of workers (crew size) as shown in the following schedule:
- A certain production process employs two inputs–labor (L) and raw materials (R). Output (Q) is a function of these two inputs and is given by the following relationship:
- An industry can be characterized by the following production function
Chapter 8—Cost Analysis
MULTIPLE CHOICE
- Economies of Scope refers to situations where per unit costs are:
- Economies of scale exist whenever long-run average costs:
- Which of the following is true with regards to a long-run cost function?
- If TC = 321 + 55Q - 5Q2, then average total cost at Q = 10 is:
- Suppose that total cost is cubic: TC = 200 + 5Q – 0.4Q2 + 0.001Q3
- What method of inventory valuation should be used for economic decision-making problems?
- According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
- For a short-run cost function which of the following statements is (are) not true?
- The cost function is:
- Which of the following statements about cost functions is true?
- Which of the following statements concerning the long-run average cost curve of economic theory is true?
- Possible sources of economies of scale (size) within a production plant include:
- The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
- The relevant cost in economic decision-making is the opportunity cost of the resources rather than the outlay of funds required to obtain the resources.
- ____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.
- ____ include the opportunity costs of time and capital that the entrepreneur has invested in the firm.
- A cottage industry exists in the home-manufacture of ‘country crafts’. Especially treasured are handmade quilts. If the fourth completed quilt took 30 hours to make, and the eighth quilt took 28 hours. What is the percentage learning?
PROBLEMS
- During the last few days the Superior Company h
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ECO 550 Midterm Part 1 NEW
Question 1
Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:
Question 2
In the shareholder wealth maximization model, the value of a firm’s stock is equal to the present
value of all expected future ____ discounted at the stockholders’ required rate of return.
Question 3
Various executive compensation plans have been employed to motivate managers to make
decisions that maximize shareholder wealth. These include:
Question 4
The primary objective of a for-profit firm is to ___________.
Question 5
To reduce Agency Problems, executive compensation should be designed to:
Question 6
Which of the following will increase (V0), the shareholder wealth maximization model of the firm:
V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t + Real Option Value.
Question 7
A change in the level of an economic activity is desirable and should be undertaken as long as the
marginal benefits exceed the ____.
Question 8
The standard deviation is appropriate to compare the risk between two investments only if
Question 9
Based on risk-return tradeoffs observable in the financial marketplace, which of the following
securities would you expect to offer higher expected returns than corporate bonds
Question 10
The ____ is the ratio of ____ to the ____.
Question 11
The approximate probability of a value occurring that is greater than one standard deviation from
the mean is approximately (assuming a normal distribution)
Question 12
The primary difference(s) between the standard deviation and the coefficient of variation as
measures of risk are:
Question 13
Suppose we estimate that the demand elasticity for fine leather jackets is .7 at their current
prices. Then we know that:
Question 14
Producers’ goods are:
Question 15
When demand is ____ a percentage change in ____ is exactly offset by the same percentage change
in ____ demanded, the net result being a constant total consumer expenditure.
Question 16
Songwriters and composers press music companies to lower the price for music downloads because
Question 17
A price elasticity (ED) of −1.50 indicates that for a ____ increase in price, quantity demanded will
____ by ____.
Question 18
The factor(s) which cause(s) a movement along the demand curve include(s):
Which of the following would tend to make demand INELASTIC?
Question 20
Even though insignificant explanatory variables can raise the adjusted R2 of a demand function,
one should not interpret their effects on the regression when
Question 21
In testing whether each individual independent variables (Xs) in a multiple regression equation is
statistically significant in explaining the dependent variable (Y), one uses the:
Question 22
The estimated slope coefficient (b) of the regression equation (Ln Y = a + b Ln X) measures the ____
change in Y for one ____ change in X.
Question 23
In which of the following econometric problems do we find Durbin-Watson statistic being far away
from 2.0?
Question 24
When using a multiplicative power function (Y = a X1b1 X2b2 X3b3) to represent an economic
relationship, estimates of the parameters (a, and the b’s) using linear regression analysis can be
obtained by first applying a ____ transformation to convert the function to a linear relationship.
Question 25
One commonly used test in checking for the presence of autocorrelation when working with time
series data is the ____.
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ECO 550 Midterm Part 2 NEW
Question 1
The forecasting technique which attempts to forecast short-run changes and makes use of economic
indicators known as leading, coincident or lagging indicators is known as:
Question 2
Consumer expenditure plans is an example of a forecasting method. Which of the general categories
best described this example?
Question 3
Which of the following barometric indicators would be the most helpful for forecasting future sales
for an industry?
Question 4
The use of quarterly data to develop the forecasting model Yt = a +bYt−1 is an example of which
forecasting technique?
Question 5
If two alternative economic models are offered, other things equal, we would
Question 6
Smoothing techniques are a form of ____ techniques which assume that there is an underlying
pattern to be found in the historical values of a variable that is being forecast.
Question 7
In Chinese coastal provinces, brick housing for a fast expanding middle class is very comparable in
size to housing in the U.S. for a family with median income of $51,000 because
Question 8
If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetary policy by raising US
interest rates next year, what is the likely impact on the value of the dollar?
Question 9
Companies that reduce their margins on export products in the face of appreciation of their home
currency may be motivated by a desire to
Question 10
Trading partners should specialize in producing goods in accordance with comparative advantage,
then trade and diversify in consumption because
Question 11
If the British pound (₤) appreciates by 10% against the dollar:
Question 12
An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of
motorcycles?
Question 13
The optimal currency area involves a trade-off of reducing transaction costs but the inability to use
changes in exchange rates to help ailing regions. If the US, Canada, and Mexico had one single
currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:
Question 14
The isoquants for inputs that are perfect substitutes for one another consist of a series of:
Question 15
Which of the following is never negative?
Question 16
The marginal rate of technical substitution may be defined as all of the following except:
Question 17
If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of
capital is 200 and the price of capital is $30, then what should the firm?
Question 18
Marginal factor cost is defined as the amount that an additional unit of the variable input adds to
____.
Question 19
The combinations of inputs costing a constant C dollars is called:
Question 20
According to the theory of cost, specialization in the use of variable resources in the short-run
results initially in:
Question 21
If TC = 321 + 55Q - 5Q2, then average total cost at Q = 10 is:
Question 22
Economies o Scope refers to situations where per unit costs are:
Question 23
Economies of scale exist whenever long-run average costs:
Question 24
What method of inventory valuation should be used for economic decision-making problems?
Question 25
The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
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STRAYER ECO 550 Week 1 DQ 1 Fundamental Economic Concepts NEW
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ECO 550 Week 1 DQ 1 Fundamental Economic Concepts NEW
“Fundamental Economic Concepts” Please respond to the following:
Answer the following DQs based on the Katrina’s Candies scenario:
From the scenario for Katrina’s Candies, examine the key factors affecting the demand for and the supply of a good in general and Katrina’s Candies specifically. Distinguish between a change in demand and a change in the quantity demanded (movement along the demand curve).
From the above, indicate the factors that are responsible for a shift in demand; and explain how the change is effected by these factors.
Indicate the factors that are responsible for a shift in supply; and explain how the change is affected by these factors.
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STRAYER ECO 550 Week 1 DQ 2 Supply and Demand NEW
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ECO 550 Week 1 DQ 2 Supply and Demand NEW
From the e-Activity, examine the key factors that influence the supply and demand of the selected good in general and Katrina’s Candies specifically. Propose two (2) methods in which organizations that provide the good may utilize this information. Provide a rationale for your response.
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STRAYER ECO 550 Week 1-11 All DQs NEW
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ECO 550 Week 1-11 All DQs NEW
ECO 550 Week 1 DQ 1 Fundamental Economic Concepts
ECO 550 Week 1 DQ 2 Supply and Demand
ECO 550 Week 2 DQ 1 Estimating Demand
ECO 550 Week 2 DQ 2 Estimating Elasticity of Demand
ECO 550 Week 3 DQ 1 Managing in the Global Economy
ECO 550 Week 3 DQ 2 Outsourcing Offshore
ECO 550 Week 4 DQ 1 Production Economics
ECO 550 Week 4 DQ 2 Production Decisions
ECO 550 Week 5 DQ 1 Applications of Cost Theory
ECO 550 Week 5 DQ 2 Cost Management
ECO 550 Week 6 DQ 1 Market Structures
ECO 550 Week 6 DQ 2 Maximizing Revenue
ECO 550 Week 7 DQ 1 Predicting Price-Setting Strategies
ECO 550 Week 7 DQ 2 Price-Setting Strategies
ECO 550 Week 8 DQ 1 Entering a Merger
ECO 550 Week 8 DQ 2 Organizational Form
ECO 550 Week 9 DQ 1 Impact of Government Regulation
ECO 550 Week 9 DQ 2 Government Regulation
ECO 550 Week 10 DQ 1 Long-Term Investment
ECO 550 Week 10 DQ 2 Cost-Benefit Analysis
ECO 550 Week 11 DQ 1 Transfer It
ECO 550 Week 11 DQ 2 Best Practices
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STRAYER ECO 550 Week 2 DQ 2 Estimating Elasticity of Demand NEW
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ECO 550 Week 2 DQ 2 Estimating Elasticity of Demand NEW
From the e-Activity, analyze the elasticity of demand for products within the selected industry relevant to Katrina’s Candies. Determine the factors involved in making decisions about pricing these products that you believe to be the most influential. Provide a rationale for your response.
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STRAYER ECO 550 Week 5 DQ 1 Applications of Cost Theory NEW
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ECO 550 Week 5 DQ 1 Applications of Cost Theory NEW
“Applications of Cost Theory” Please respond to the following:
• * Answer the following DQs based on the Katrina’s Candies scenario:
o From the scenario for Katrina’s Candies, determine the appropriate type of market structure for the situation in question. Cite at least four (4) defining characteristics that have helped you reach this decision regarding the appropriateness of the chosen structure.
o Recommend two (2) kinds of pricing and output strategies that Katrina’s Candies should use to reach the goal of profit maximization. Suggest key modifications that Katrina’s Candies should make in order to maintain a competitive advantage when new entrants enter the market. Provide a rationale for your suggestions.
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STRAYER ECO 550 Week 2 DQ 2 Estimating Elasticity of Demand NEW
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ECO 550 Week 2 DQ 2 Estimating Elasticity of Demand NEW
From the e-Activity, analyze the elasticity of demand for products within the selected industry relevant to Katrina’s Candies. Determine the factors involved in making decisions about pricing these products that you believe to be the most influential. Provide a rationale for your response.
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STRAYER ECO 550 Week 3 Assignment 1 Demand Estimation (2 Sets) NEW
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ECO 550 Week 3 Assignment 1 Demand Estimation (2 Sets) NEW
This Tutorial contains 2 Sets
Option 1: Demand equation:
QD = - 5200 - 42P + 20PX + 5.2I + .20A + .25M
(2.002) (17.5) (6.2) (2.5) (0.09) (0.21)
R2 = 0.55 n = 26 F = 4.88
Independent variables:
Q = Quantity demanded of 3-pack units
P (in cents) = Price of the product = 500 cents per 3-pack unit
PX (in cents) = Price of leading competitor’s product = 600 cents per 3-pack unit
I (in dollars) = Per capita income of the standard metropolitan statistical area
(SMSA) in which the supermarkets are located = $5,500
A (in dollars) = Monthly advertising expenditures = $10,000
M = Number of microwave ovens sold in the SMSA in which the supermarkets are located = 5,000
1. Compute the elasticities for each independent variable
2. Determine the implications for each of the computed elasticities for the business in terms of short-term and long-term pricing strategies. Provide a rationale in which you cite your results.
3. Recommend whether you believe that this firm should or should not cut its price to increase its market share. Provide support for your recommendation.
4. Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the price changes are 100, 200, 300, 400, 500, 600 cents.
a. Plot the demand curve for the firm.
b. Plot the corresponding supply curve on the same graph using the following MC / supply function Q = -7909.89 + 79.1P with the same prices.
c. Determine the equilibrium price and quantity.
d. Outline the significant factors that could cause changes in supply and demand for the low-calorie, frozen microwavable food. Determine the primary manner in which both the short-term and the long-term changes in market conditions could impact the demand for, and the supply, of the product.
5. Indicate the crucial factors that could cause rightward shifts and leftward shifts of the demand and supply curves for the low-calorie, frozen microwavable food.
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STRAYER ECO 550 Week 3 DQ 1 Managing in the Global Economy NEW
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ECO 550 Week 3 DQ 1 Managing in the Global Economy NEW
“Managing in the Global Economy” Please respond to the following:
• *Answer the following DQs based on the Katrina’s Candies scenario:
o From the scenario for Katrina’s Candies, assuming the absence of quantitative data, determine the qualitative forecasting techniques that could be used within this scenario.
o Now, assume you have acquired some time series data that would enable you to make short, medium, and long term forecasts. Ascertain the quantitative technique that will provide you with the most accurate forecast. Provide a rationale for your responses
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STRAYER ECO 550 Week 3 DQ 2 Outsourcing Offshore NEW
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ECO 550 Week 3 DQ 2 Outsourcing Offshore NEW
“Outsourcing Offshore” Please respond to the following:
• Answer the following DQs on the decision to outsource offshore:
o Aside from maximizing profits, list the key factors that managers should consider when deciding whether or not to outsource offshore. Determine the key factors that you believe to be the most influential. Provide a rationale for your response.
o Examine the manner in which the firm’s decision to outsource offshore is impacted by foreign exchange. Determine whether or not it matters where the company outsources offshore. Provide a rationale for your response.
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STRAYER ECO 550 Week 4 DQ 1 Production Economics NEW
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ECO 550 Week 4 DQ 1 Production Economics NEW
“Production Economics” Please respond to the following:
• * From the scenario for Katrina’s Candies, determine the relevant costs for the expansion decision, and distinguish between the short run and the long run costs. Recommend the key decision-making criteria that Katrina’s Candies should use for expansion decisions in the short run and in the long run. Provide rationale for your response.
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STRAYER ECO 550 Week 4 DQ 2 Production Decisions NEW
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ECO 550 Week 4 DQ 2 Production Decisions NEW
“Production Decisions” Please respond to the following:
• From the e-Activity, recommend whether the company in question should or should not continue to produce the good or service. Provide a rationale for your response.