problems Practice for first test Econ 001 Schuler
Tutoring session are also on Sunday night at 7-9 in RF 102 A. The management of an Italian fashion company Dunder Inc. has to decide if they should carry out marketing initiatives which would lead to an increase of their sale. Each initiative will generate $11,000,000 in revenue.. Information about total cost of these initiatives is given in the table below. Number of marketing initiatives Total Cost 1 $ 10 million 2 $ 20 million 3 $ 32 million 4 $ 46 million . How many marketing initiatives should they carry out? Explain how you derived your answer?
B. Suppose that both Jim and Pam like to grow tomatoes and green peppers in the backyard. The current growing season is two months. In one month, Jim can grow in his backyard either 60 tomatoes and 0peppers or 0 tomatoes and 30 peppers or any other combination lying on the line between these two points. In the same amount of time, Pam can grow in her backyard either 40 tomatoes and 0 peppers or 0 tomatoes and 10 peppers or any other combination lying on the line between these two points. Draw and sketch the joint PPF for one month. State their opportunity cost for each product for each person. If Pam decided to have a two month growing season, would the opportunity cost change? Would that change the comparative advantages? Assume that any harvested crop has unlimited storage time.
C. Suppose Gotham Transit considers raising the price of its bus tickets from $1.00 to $1.25 per ticket. It that knows the price elasticity of demand for bus tickets is -0.1. At present, it sells 25,000 tickets per day. The managers are raising the price because they decided to finance a new bus clean up program that will cost an additional $6,000. Did the managers raise the price by enough to finance the new program? Explain why the managers did want to lower the price using the concept of elasticity of demand.
Practice problems for first test Econ 001 Schuler
D. Review the problem on problem set 2. Make sure that you can show what is meant by market surplus and market shortage. 1. Suppose that demand is P = 5.5 0.05 Qd and supply is P = 0.5 + 0.05 Qs
Solve these equations (more math then I believe is needed for the test) for equilibrium Prove that the equilibrium price is $3 and the equilibrium quantity is 50. 2. Now examine demand is Qd = 110 20 P and supply is Qs = 20 P 10 Solve these equations for equilibrium. Prove that the equilibrium price is $3 per unit and the equilibrium quantity is 50 Okay state how these parts are related. Suppose that the supply shifts to P = 0.05 Qs Without any calculations explain what happens to the price and quantity. What if you were told that the Ed = 1 at Q = 55 Fill in the table. See for example, at Q = 55, Ed = 1 and that is unit elastic Level of quantity 55 2 50 60 100 110 The value of Ed will be =1, or <1 or > 1? =1 Elasticity of demand will be unit elastic, inelastic or elastic? Unit elastic
Why did I stop at the value of Q = 55?