# Managerial Economics and Business Strategy with Data Disk

Title: Managerial Economics and Business Strategy with Data Disk

Author: Michael Baye

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Chapter 10: Test Bank Multiple Choice Questions 1. Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn \$5 million in profits. If neither of you advertise, you will each earn \$10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn \$15 million and the non advertising firm will earn...

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N.C. State - ECG - 703
January, 2003Managerial Economics ECO 9705 Spring 2003 Tuesdays and Thursdays, 6:00 7:15pm Prof. June Ellenoff O'NeillChapter 1 - Preliminaries Understand real versus nominal prices Microeconomics behavior of individual economic units, including consume
N.C. State - ECG - 700
Lecture 1 - Math Review.Lecture 1 - Math Review.Topics from Calculus you should know: How to define a derivative How to interpret f (x) = 2. What does that mean? How to calculate the derivative of:1 2 3Topics from Calculus you should know (cont.): The
N.C. State - ECG - 700
Problem Set 6 - Brief Solutions1. and 2. For both of these problems, the solution isp1 p2= 1.3. Solve for the demand of consumer 1 by setting 2x1 = x2 and 3x1 + x2 = 2x1 + 3x2 . The solution is a bit messy, but it's whatever ratio solves the equation:
N.C. State - ECG - 700
Problem Set 61. Consider the following exchange economy. There are two goods and two consumers. The first consumer has a utility function U1 (x1 , x2 ) = x x , and the second consumer has a utility function U2 (x1 , x2 ) = 1 2 x1 + x2 . Consumer 1 has an
N.C. State - ECG - 700
N.C. State - ECG - 700
Problem Set 51. 7.1 &quot;george is seen to place an even.&quot; 2. 7.3 &quot;an individual purchases a dozen eggs.&quot; 3. 7.5 &quot;Ms. Fogg is.&quot; 4. 18.1 &quot;a personal-injury lawyer.&quot; 5. 18.4 &quot;Suppose there is a 50-50.&quot;0
N.C. State - ECG - 700
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N.C. State - ECG - 700
Fall 2005 Econ 414 midterm exam Take extra time to write complete answerssignificant points will be deducted for incomplete or unjustified answers. 1(a). Find all the pure strategy equilibria of the following game.(7 points) 1(b). Find the mixed strategy
N.C. State - ECG - 700
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N.C. State - ECG - 700
1(a). Find all the pure strategy equilibria of the following game. 1(b). Find the mixed strategy equilibrium of the same game. R R L (4,3) (0,2) L (6,2) (8,0)2. You and I are to play the following game. It starts with 3,657 pennies in the middle of the t
N.C. State - ECG - 700
L ?1ri\ t x-;, ^t^/(t - nt \ rcJ trlLveIIi)e.r^.,*tIIb.-&quot;\$td*wgJcur,e &quot;^;L'K:-rl P&quot;'A'h ?1 1(t):.L&lt;-cuu-c\f=3P&quot; =,o5 \?f'&quot;1v@,Db xt ,.1 [tA)^l'\, c5x r , z K ' 3*K:V : t'\LLuT(U; @nu.-^)z.F . )'2.,lb n.&quot;r ,LX:) .35 K: 3
N.C. State - ECG - 700
Problem Set 41. 5.2 only need to do parts a, b, c, and e. (Problem starts &quot;David N. gets \$3 per week .&quot;) 2. 5.4 (&quot;As in Example 5.1, assume .&quot;) 3. 5.12 (&quot;Quasi-linear utility (revisited)&quot;) 4. 6.1 (&quot;Heidi recieves utility from two goods, goat's milk.&quot;) 5.
N.C. State - ECG - 700
i t.&quot;),itI I- ()t :,\^t)c. \r)L ( ^,y, ^i)(,'L-. .-*--cfw_.V_ )__1* cfw_L\f p^.^,ly y - t )7Ic.)x.L*7I't\' P&quot;'- l-\ P.,( t.) ,\.,\i-r\ Ylrx K*IL)t\ . &quot;_-)jL-L,'YI., 1/,V'\-\-oIIt._':l .-PvYz(e)I:ri 1-I u. !t&quot;/)tI
N.C. State - ECG - 700
Problem Set 3 1. Suppose an individual's utility function is represented by the CES function: 1 1 U (x, y) = - - x y (a) Use the Legrangian multiplier method to calculate the uncompensated (Marshallian) demand functions for X and for Y. (b) Show that dema
N.C. State - ECG - 700
N.C. State - ECG - 700
Problem Set 2 - Preferences 3.1 You don't need to graph the curve, just determine whether or not an indifference curve is convex. In addition to the problems in the book, also do: f. U = X 2 + Y 2 1 2 g. U = X 3 Y 3 h. U = ln x + ln y 3.3 4.2 4.5 4.71
N.C. State - ECG - 700
Problem Set 1 - Calculus Review I. For each function, calculate the derivative with respect to x. a.f (x) = 17 b.f (x) = 5x3 c.f (x) = 3x 3 1 3 d.f (x) = x2 e.f (x) = ln(x ) f.f (x) = ex g.f (x) = 5e3x h.f (x) = x3 - 5x2 + 6x + 2 i.f (x) = x3 x5 j.f (x) =
N.C. State - ECG - 700
ECG 700 Midterm In order to receive full points, you must carefully and thoroughly justify your answers. Question 1 - 30 points 1 1 A person's utility is given by the Cobb-Douglass function u(x, y) = x 2 y 2 . (a) Show that the optimal demand functions fo
N.C. State - ECG - 700
Preferences.PreferencesPreferences Primitives: X : : : &quot;set of alternatives&quot; &quot;at least as good as&quot; (weakly preferred) (strictly preferred) (indifference) Closed and convex setRationality Assumptions1Completeness: x, y X , we have either x y x. Transi
N.C. State - ECG - 700
Chapter 3Preferences and UtilityNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.Utility We can assume the individual is considering two goods, x and yutility = U(x,y)Economic Goods In the utility function, the x's
N.C. State - ECG - 700
Chapter 4Utility Maximization and ChoiceNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.Marginal Rate of Substitution The negative of the slope of the indifference curve at any point is called the marginal rate of su
N.C. State - ECG - 700
Chapter 5Income and Substitution EffectsNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.Demand Functions The optimal levels of x1,x2,.,xn can be expressed as functions of all prices and income These can be expressed
N.C. State - ECG - 700
Chapter 5Income and Substitution EffectsNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.Changes in a Good's PriceQuantity of ySuppose the consumer is maximizing utility at point A. If the price of good x falls, the
N.C. State - ECG - 700
Games - IntroductionMost of classical microtheory is static. We assume that either a consumer's choices don't affect the prices she faces or else that she doesn't realize that she affects them. Similarly, a firm makes decisions about production as a resp
N.C. State - ECG - 700
Models of CompetitionA Cournot game with linear demand and constant marginal cost: Two firms, firm 1 and firm 2. Each firm chooses a quantity of a product to produce, q1 and q2 . Each unit costs c to produce, so the total cost of producing q units is q c
N.C. State - ECG - 700
Constrained OptimizationConstrained Optimization: Almost all of microeconomics can be described as constrained optimization: One definition of economics I've heard: Economics is the study of efficient allocations of scarce resources. Efficient means opti
N.C. State - ECG - 700
Differentiation - a quick reviewThe derivative generalizes to multiple dimensions in a straightforward way. x-i denotes all variable other than i. Definition Suppose f : Rn R. The partial derivative of a function: f (xi , x-i ) - f (x) f (x) = fi (x) = l
N.C. State - ECG - 700
Revealed Preference If (x*,y*) is chosen when (x',y') is available, we say that (x*,y*) is revealed preferred (x',y'). Often very helpful. You can never observe a person's utility function, but you can observe her choices.The Lump Sum Principle Taxes
N.C. State - ECG - 700
Marshallian Demand Elasticities Price elasticity of demand (ex,px)ex ,px x/x px / px x px px xMarshallian Demand Elasticities Income elasticity of demand (ex,I)e x ,I x/x I/I x I I x Cross-price elasticity of demand (ex,py)e x ,py x/x py / py x py
N.C. State - ECG - 700
Chapter 7Uncertainty and InformationNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.Expected UtilityLottery 1: Win \$500,000 with Probability 1 Lottery 2: Win \$2,500,000 with Prob .1, \$500,000 with prob. .89, and \$0 w
N.C. State - ECG - 700
Chapter 7Uncertainty and InformationNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.St. Petersburg Paradox A coin is flipped until a head appears If a head appears on the nth flip, the player is paid \$2nx1 = \$2, x2
N.C. State - ECG - 700
Chapter 7Uncertainty and InformationNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.Expected Utility Remember, preferences have expected utility form if there exists u1,.un such thatnE ( L)i 1pi ui Where L= p1,.
N.C. State - ECG - 700
Chapter 6Preferences and UtilityNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.The Two-Good Case The types of relationships that can occur when there are only two goods are limited But this case can be illustrated w
N.C. State - ECG - 700
Chapter 7Uncertainty and InformationNicholson and Snyder, Copyright 2008 by Thomson South-Western. All rights reserved.Mathematical Statistics A random variable is a variable that records, in numerical form, the possible outcomes from some random even
N.C. State - ARE - 201
ECG 561, Intermediate Econometrics, Spring 2008 Study Questions for Midterm II Consider the following multiple regression: yi = + 1x1i + 2x2i + ui, where the basic assumption about the error term hold. Describe in detail how you could test the following h
N.C. State - ARE - 201
Study Questions for Midterm 1 ECG 561, Spring 2008 1. Consider two discrete random variables, X and Y. Their joint probability distribution is given in the table below: X 0 0 Y 1 a. b. c. d. 0 1/3 1/3 1/3 1 0 2 0Are X and Y independent? Support your answ
N.C. State - ARE - 201
Review questions for ECG 561 final exam - Spring 20085.6. You have a data set on 3,000 golf scores for professional golfers from tournaments in a single year. You are interested in the effect of prize money on scores and, in addition, are interested in
N.C. State - ARE - 201
Lecture 14: Regulation, Safety, and Equity I. Other roles of government in the economy 1. 2. 3. 4. enforce property rights anti-trust income redistribution regulating business and consumer choicesII. Enforce property rights 1. means to protect ownership
N.C. State - ARE - 201
Lecture 13: Public Goods 1. Thus far we have been talking about private goods, which are products and services that, once an individual consumes them, their use or consumption is not available to others (examples: if I eat a hamburger, that hamburger is n
N.C. State - ARE - 201
Lecture 12: Externalities 1. Market failure occurs when an action creates costs or benefits to others, and the creator of the action is not charged for the cost or paid for the benefit. Examples: You drive a vehicle (action) which emits some pollutants, b
N.C. State - ARE - 201
Lecture 11: Taxes 1. Average Tax Rate = taxes paid divided by income of taxpayer For U.S., average tax rate is around 30% 2. Marginal Tax Rate = change in taxes paid divided by change in incomeFor a &quot;flat tax&quot;, where all income is taxed at the same rate,
N.C. State - ARE - 201
Lecture 10: International Markets I. Why trade with other countries? Same reasons people trade with each other - because it's beneficial to do so. But two specific reasons when looking at international trade 1. Absolute Advantage: Consider countries A and
N.C. State - ARE - 201
Lecture 9: Market Change 1. Markets are rarely &quot;in equilibrium&quot;. Something is always changing to change demand or supply (remember the &quot;factors&quot; we talked about that shift the demand and supply curves). One real benefit of economics is helping predict wha
N.C. State - ARE - 201
Lecture 8: Buyers and Sellers Put demand and supply together to get &quot;equilibrium price&quot; - price at which the quantity of the product or service (often called a &quot;good&quot;) desired to be purchased by buyers exactly equals the quantity of the product or service
N.C. State - ARE - 201
Lecture 7: Market Structure I. Perfect Competition1. A &quot;perfectly competitive&quot; market has the following characteristics: * each business sells the exact same product * each business is relatively small and can't affect the price of the product * each bus
N.C. State - ARE - 201
Profit Maximization by the Firm SITUATION 1: PRICE TAKER - firm has no control over price, and takes price as given objective of firm is to sell the amount of output that will maximize its profits Way 1: Calculate profit at alternative production level; g
N.C. State - ARE - 201
Lecture 6: Price and Revenue Elasticity 1. Although demand curves are downward sloping and supply curves are upward sloping, their degree of &quot;steepness&quot; or &quot;flatness&quot; can vary. 2. What does this mean? A &quot;steep&quot; demand curve, like:120 100 80 price 60 40 2
N.C. State - ARE - 201
Lecture 5: Costs and Producing 1. Types of business organizations sole proprietorship: one owner runs everything partnership: multiple owners corporation: shareowners own the business; shares can be bought and sold; shareholders hire a CEO (chief executiv
N.C. State - ARE - 201
Lecture 4: InvestingI. Why Invest? To transfer resources to the future and at least keep pace with inflation. Inflation erodes the purchasing power of dollars - if keep &quot;money in a mattress&quot;, it loses value. II. What Do You Look for When You Invest? Want
N.C. State - ARE - 201
Lecture 3: Earning 1. First, background on a &quot;supply curve&quot; - shows how much is produced, or offered, of something compared to price of that something. Idea is, if producers can receive more from the price, they'll want to produce and sell more. Can also
N.C. State - ARE - 201
Lecture 2: Buying I. We buy things because they help us live and make us happy. Economists use a catchall term, utility, to mean the benefit we get from buying something. II. Most of us &quot;want&quot; or &quot;need&quot; more than we can afford. In economics, we bring &quot;wan
N.C. State - ARE - 201
Lecture 1: What Is Economics? I. The Economic Problem: There are scarce resources but unlimited potential uses of those resources. This scarcity forces tradeoffs between resource use. Who is to decide how to allocate scarce resources? Who decides what is
N.C. State - ARE - 201
ARE 201 Fall 2009, Test 2Name _KEY_I. Complete the sentence or provide the short answer on the answer sheet. 1. Business costs unrelated to how much output is produced are called fixed costs. 2. Business costs that change as the amount of output changes
N.C. State - ARE - 201
ARE 201 Fall 2009 Test 1Name _KEY_I. Complete the sentence or provide the short answer on the &quot;answer sheet&quot;. 1. An economy in which a central authority decides what is produced and who receives what amount of products and services is called a _command_
N.C. State - ARE - 201
ARE 201 Name _KEY_ Lab #5 Compete the sentence or work the problem. 1. Total taxes paid divided by the taxpayer's income is the _average_ tax rate. 2. The change in taxes paid divided by the change in the taxpayer's income the marginal_ tax rate. 3. Gross
N.C. State - ARE - 201
Lab 4 ARE 201, Fall 2009Name _KEY_1.Below are the total costs for each possible monthly production level of couches made by Tarheel Furniture Company. If Tarheel Furniture Company is a price-taker and the current price is \$400 per couch, calculate the
N.C. State - ARE - 201
ARE 201 Fall 2009 Complete each sentence.Lab 31.The objective of a firm in a market economy is to maximize _profits_.2.Profits = _Revenues_ minus costs.3. Profit-seeking firms usually can offer products at lower prices than nonprofit firms because p
N.C. State - ARE - 201
ARE 201 Name _KEY_ Fall 2009 Lab # 2 Complete the sentences or provide the short answer.1. If pizza and beer are complements, then an increase in the price of beer will _decrease_ the purchases of pizza. 2. In Micro Mischief, Dia appears on a radio talk
N.C. State - ARE - 201
ARE 201 Fall 2009 Lab #1Name _KEY_Work the problems and show all your calculations. Use the attached table if necessary. Give answers to the nearest dollar, except #1 - give dollars and cents. 1. Calculate the real value in 2009 (in 2009 purchasing powe
N.C. State - ARE - 201
Chapter 1 to Chapter 9 See the study guides for previous chapters. Chapter 10 1. What is externality? What is negative externality and what is positive externality? What is the effect of an externality on economic efficiency? 2. When we have a negative ex
N.C. State - ARE - 201
ARE 201 Spring 2009 Sample Final Exam Answer Sheet MULTIPLE CHOICE (2 points each) 1. c 2. d 3. c 4. c 5. c 6. c 7. a 8. c 9. b 10. b 11. b 12. b 13. c 14. a 15. a 16. c 17. a 18. b 19. b 20. d 21. b 22. c 23. b 24. b 25. c 26. c 27. b TRUE/FALSE (2 point