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Bus640 Managerial Economics Essay example

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Week 2 Assignment
Crystal G Tanner
BUS640: Managerial Economics
Brian Shaw
April 23, 2012

CH 3. 2. Appalachian Coal Mining believes that it can increase labor productivity and, therefore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC = 40P where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) is MR = 1,000 - 10P
How much pollution reduction should Appalachian Coal Mining undertake?
Set MC = MR and solve for P

40P = 1000-10P

40P + 10P = 1000

50P = 1000

P = 1000/50

P = 20 units of …show more content…

If each security guard is paid $200 a week and the cost of a stolen radio is $25, how many security guards should the firm hire?
@ 0 guards 50 (200*0) + (25 * 50) = 1250 @ 1 Guard 30 (200 * 1) + (25* 30) = 950
@ 2 Guards 20(200 * 2) + (25 * 20) = 900
@ 3 Guards 14(200*4) + (25*14) = 950
@ 4 Guards 8(200*4) + (25*8) = 1000
@ 5 Guards 6(200*5) + (25*6) = 1150 Therefore Twenty-first Century Electronics should hire two guards
b. If the cost of a stolen radio is $25,what is the most the firm would be willing to pay to hire the first security guard?
Guard one = (50 – 30) * 25
Guard one = 20 * 25
Guard One = 500
The first security guard would be paid the maximum amount 500

c. If each security guard is paid $200 a week and the cost of a stolen radio is $50, how many security guards should the firm hire?
MC = 200
Marginal Benefit (4) = (14-8)*50
MB = 6 * 50
MB = 300
TB = (50-8) * 50 – (4*200) = 1300
Therefore they should hire four guards @ $ 50 cost of stolen radio
CH 4. 1. The director of marketing at Vanguard Corporation believes that sales of the company’s Bright Side laundry detergent (S) are related to Vanguard’s own advertising expenditure (A), as well as the combined advertising expenditures of its three biggest rival detergents (R). The marketing director collects 36 weekly observations on S, A, and R to estimate the following multiple regression equation:
S = a + bA + cR where S, A, and R are

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