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Econ528Spring2011MidTermExamStudyGuide

# Econ528Spring2011MidTermExamStudyGuide - University of...

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University of Louisiana at Lafayette Econ 528: Managerial Economics Spring 2011 Mid-Term Exam Study Guide 1. Monthly demand and cost relations for Presto’s frozen dessert maker are as follows: P = \$60 - \$0.005Q TC = \$100,000 + \$5Q + \$0.0005Q 2 (a)Compute the marginal cost. (b)Compute the profit-maximizing price. (c)Compute the profit-maximizing quantity. (d)Compute Presto’s total monthly profit. 2. The marketing and accounting departments of Pharmed Caplets, Inc. have provided you with the following monthly total revenue and total cost information: TR = \$900Q - \$0.1Q 2 TC = \$36,000 + \$200Q + \$0.4Q 2 (a)Compute the profit maximizing quantity. (b)Compute the profit-maximizing price. (c)Compute its total monthly profit. Page 1 of 15

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3. Prices of the Indigent Care Center, Inc. are stable at \$50. This means that P = MR = \$50. Total cost relation for the company is as follows: TC = \$78,000 + \$18Q + \$0.002Q 2 (a)Calculate the output level that will maximize the profit. (c) Calculate the maximum profit. 4. Suppose the Indigent Care Center, Inc. in question (3) is a not-for- profit organization and wants to provide as much patient care as possible with zero profit, then (a)Compute the company’s optimal quantity. 5. The revenue and cost relations of Commercial Recording, Inc. are TR = \$3,000Q - \$0.5Q 2 MR = = , - TR Q \$3 000 \$1Q TC = \$100,000 + \$1,500Q + \$0.1Q 2 MC = = , + . TC Q \$1 500 \$0 2Q (a)Calculate output, marginal cost, average cost, price, and profit at the average cost-minimizing activity level. 6. The revenue and cost relations of Better Buys, Inc. are TR = \$4,500Q - \$0.1Q 2 MR = = , - . TR Q \$4 500 \$0 2Q Page 2 of 15
TC = \$2, 000,000 + \$1,500Q + \$0.5Q 2 MC = = , + TC Q \$1 500 \$1Q (a)Calculate output, marginal cost, average cost, price, and profit at the average cost-minimizing activity level. 7. The demand curve and the marginal revenue relations of Restaurant Marketing Services, Inc. are: P = \$130 - \$0.000125Q MR = = - . TR Q \$130 \$0 00025Q (a)Calculate output, price, and total revenue at the revenue- maximizing activity level. 8. Coupon Promotions, Inc. has the following demand function for its coupon books: Q = 10,000 – 5,000P + 0.02Pop + 0.4I + 0.6A Where Q is the quantity, P is the price, Pop is population, I is disposable income per capita, and A is advertising expenditures. (a)Determine the demand curve faced by CPI in a typical market where Pop = 1,000,000 person, I = \$35,000 and A = \$10,000. Show the demand curve with quantity expressed as a function of price, and price expressed as a function of quantity. Page 3 of 15

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(b)Calculate the quantity demanded at price of \$5. (c)Calculate the point price elasticity of demand at the price of \$10. (d) Given the point price elasticity of demand in (c), would a price reduction increase its total revenue? 9. A review of industry-wide data for the domestic wine manufacturing industry suggests the following industry supply function: Q = -7,000,000 + 400,000P – 2,000,000P L – 1,500,000P K + 1,000,000W Where Q is cases supplied per year, P is the wholesale price per case, P L is the average price paid for unskilled labor, P K is the average price of capital and W is weather measured by the average seasonal rainfall in growing areas.
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Econ528Spring2011MidTermExamStudyGuide - University of...

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