106_hw_1 - Econ 106 Managerial Economics Homework 1 shangze...

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Econ 106 Managerial Economics Homework 1 shangze li Summer 2011 5160114 (1)the decreasing of Middle East oil production lead a leftward shift in the supply curve for oil, and thus result in an increase in the equilibrium price of crude oil. Since oil is an input in producing gasoline which will decrease the supply of gasoline, resulting in a higher equilibrium Price of gasoline and a lower equilibrium quantity. The small cars can be considered as the substitutes of gasoline, so the higher price of gasoline will increase the demand for small cars. The equilibrium prices of small cars probably increase the equilibrium quantity of small cars decrease. However, SUV is heavy on oil, so when the price of gasoline goes up. The equilibrium quantity of SUV decrease and the equilibrium price of SUV will be likely increase.
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(2) No, I don’t agree with that idea. Since the change in demand and the change in quantity demand are different, although the higher cigarette price will reduce the quantity demand for cigarettes, it will not reduce the demand for cigarettes. 3 (a)NPV =PV- OP COST. the present value is the benefit generated from attending school (including the future higher earnings and the good reputation of the famous school provides). When the PV is greater than opportunity cost (include the explicit cost of book and tuition and the implicit loss, the money earn form work instead of going to school) is worth to pursue a MBA degree. Otherwise, it is not worth to get a MBA degree (b)The increasing of the salaries of managers without a MBA degree represent there is an increase of the opportunity cost of getting an MBA degree. However the PV keeps the same, thus there is a
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106_hw_1 - Econ 106 Managerial Economics Homework 1 shangze...

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