MBA
MANAGERIAL ECONOMICS
Arcadia IMBA Module 2
University Wide Individual Assignment (UWIA)
12th July 2013
PROBLEM SET #1
1. Complete the following table and answer the accompanying questions.
a. At what level of the control variable are net benefits maximized?
Net Benefit is also profit. The formula for this is MB = MC. As seen in the table completed above, after applying the formula then net benefit is maximized where Q = 106.
b. What is the relation between marginal benefit and marginal cost at this level of the control variable?
Where marginal benefit is equal to marginal cost (MB = MC), net benefit is maximized
2. Arcadia recently instituted an in-house
…show more content…
b. Which option has the greatest present value?
NPV = CF1 + CF2 + CF3 (1+i) (1+i) 2 (1+i) 3
Option A = 70,000 + 80,000 + 90,000 1+ .08 (1+.08) 2 (1+.08) 3 = 64,814.81 + 68,587.11 + 71,444.90 = 204,846.82
Option B = 50,000 + 90,000 + 100,000 1+ .08 (1+.08) 2 (1+.08) 3 = 46,296.30 + 77,160.49 + 79,383.22 = 204,840.01
Option C = 30,000 + 100,000 + 115,000 1+ .08 (1+.08) 2 (1+.08) 3 = 27,777.78 + 85,733.88 + 91,290.71 = 204,802.37
By calculating the present value of the three options, option A is the most attractive with $204,846.82.
5. Consider a market characterized by the following demand and supply conditions:
Demand: PX = 50 -5QX Supply: PX = 32 + QX.
Graph the demand and the supply. Label the axis and the equilibrium. The equilibrium price and quantity are, respectively?
To find the equilibrium price and quantity, find the point where demand curve crosses the supply curve.
Demand = Supply 50 -5Qx = 32 + Qx Q = 3
To find price, substitute 3 to Qx of demand or supply
The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the
So, to summarize with all the information given, Company A should always strive to have their marginal cost be equal to their marginal cost in order to maximize profit. If they see that their marginal revenue is higher than the marginal cost then more output needs to be produced to get their max profit. In contract, if the marginal cost if higher than the marginal revenue then output needs to
Fill in the matrix below and describe how changes in price or quantity of the goods and services affect either supply or demand and the equilibrium price. Use the graphs from your book and the Tomlinson video tutorials as a tool to help you answer questions about the changes in price and quantity
The price of cheese and milk in the market are $2 and $5 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of milk maximizes profits?
Fill in the matrix below and describe how changes in price or quantity of the goods and services affect either supply or demand and the equilibrium price. Use the graphs from your book and the Tomlinson video tutorials as a tool to help you answer questions about the changes in price and quantity
If we consider this supply and demand diagram prior to Government intervention (red line), the market leads to equilibrium price and quantity (P1, Q1) determined at the intersection of the supply (or MPC) and demand curve. Due to the
In our analysis we determined the equations for total cost and marginal cost using the average cost obtained from the regression model provided, and the fixed costs estimates in the collected data calculated by a previous resource endorsed by the company. Once we have determined the marginal cost equation, we calculated the output for perfect competition profit maximizing criteria P
At the price of $5.00, the quantity supplied equals the quantity demanded. At a price of $7.00, the quantity demanded is 120 greeting cards and the quantity supplied is 160 greeting cards. There is a surplus of 40 greeting cards a week and the price falls. As the falls, the quantity demanded increases, the quantity supplied decreases, and the surplus decreases. The price falls until the surplus disappears. The market equilibrium occurs at a price of $5.00 and 140 cards a week so the price falls to $5.00 a greeting card.
a.) Draw and properly label the demand and supply graphs (this means you must label the axes and any lines you include on the graph).
The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the
In this way, the Fed manages price inflation in the economy. So bonds affect the U.S. economy by determining interest rates. This affects the amount of liquidity. This determines how easy or difficult it is to buy things on credit, take out loans for cars, houses or education, and expand businesses. In other words, bonds affect everything in the economy. Treasury bonds impact the economy by providing extra spending money for the government and consumers. This is because Treasury bonds are essentially a loan to the government that is usually purchased by domestic consumers. However, for a variety of reasons, foreign governments have been purchasing a larger percentage of Treasury bonds, in effect providing the U.S. government with a loan. This allows the government to spend more, which stimulates the economy. Treasury bonds also help the consumer. When there is a great demand for bonds, it lowers the interest rate.
22) The above figure shows a graph of the market for pizzas in a large town. At a price of $14, there will be A) no pizzas supplied. B) equilibrium. C) excess supply. D) excess demand. Answer: C 23) The above figure shows a graph of the market for pizzas in a large town. At a price of $5, there will be A) excess demand. B) excess supply. C) equilibrium. D) zero demand. Answer: A 24) The above figure shows a graph of the market for pizzas in a large town. What are the equilibrium price and quantity? A) p = 8, Q = 60
Evaluate each of the following changes in supply and/or demand. How will each affect equilibrium price and quantity in a competitive market? Will price and quantity rise, fall, or be unchanged? Based on shifts, will the answers be indeterminate?
Using appropriate diagrams, discuss how an increase or an improvement in the following non-price determinants of supply would change equilibrium prices and quantities.
a) Draw Brennan's average total, marginal revenue and marginal cost curves. (Hints: calculate total revenue (P* times Q) first, and then calculate MR)