MANAGERIAL ECONOMICS
Spring 2016
Possible Mid-Term Questions
Part I.
Indicate whether each of the following statements is true, false, or
uncertain, and explain your answer. Your grade will depend primarily on the
quality of your explanation. If a word or
Chapter 3A
Elasticity
Elasticity
Elasticity is useful for managerial decision making.
What is elasticity?
Elasticity measures
a variable changes
in response to a change in another variable.
(e.g.) If P of iPhones 10%, Qd but by how much? 10%? 20%? 80%?
Chapter 2
Supply and Demand
Supply and Demand Model: An Overview
Assumptions
Perfectly competitive market
Many sellers and buyers
_
_
_
ceteris paribus which means _
Rational self-interest
Demand
Demand (= D Curve or D Equation)
Law of D
The P and Qd
CALCULUS REVIEW PROBLEMS
Ru les of Differentiation
U
Find derivative of each of the following functions, using whatever rules that are necessary:
1. y = 256
2. y = 5x - 12
3. y = 4x5
4. y = 2x6 + 3x4 + x3 - 42
5. P = 5q2 - 4q + 9
6. f(u) = 2u5 + 3u3
7. f(
Chapter
11
Oligopoly and
Monopolistic Competition
Four Market Structures Again
more competition
Perfect Competition
Monopolistic Competition
less competition
Monopoly
Oligopoly
Oligop
oly
Characteristics
1.
A few frms
(2 frms =
Rivalry
) among frms: Fir
CALCULUS REVIEW PROBLEMS
Rules of Differentiation
U
Find derivative of each of the following functions, using whatever rules that are necessary:
1. y = 256
2. y = 5x - 12
3. y = 4x5
4. y = 2x6 + 3x4 + x3 - 42
5. P = 5q2 - 4q + 9
6. f(u) = 2u5 + 3u3
7. f(x
ECN 280 Group Exercise
Supply and Demand
Gr
oupMe
mbe
r
s
Name
s
:
Use supply and demand curve shifts to illustrate the effect of the following events on the market for
butter. Briefly explain your graph and make clear what happens to the equilibrium P an
Four Market Structures
less
competition
Monopoly
Oligopoly
more competition
Perfect Competition
Monopolistic Competition
What is monopoly?
Price and Output Decisions under Monopoly
Unlike Price-takers, D curve facing monopoly is downward sloping
Why?
Calculus Review
Why use calculus in economics?
Economic analysis can be more precise with calculus
(e.g.) Should a firm increase output (Q) to maximize profit ()?
Yes, if (or loss ) by Q
(or if MR > MC, regardless of current total )
Decisions can be made
Chapter 1
Introduction
Economics
is the study of how to choose to use _ resources
most efficiently
Managerial Economics
applies economic principles to managerial decision-making
Managerial Decision Making
Goal of a Firm? _ maximization
Profit = Tota
ECN 280 Group Exercise
Date:
Group Members:
The demand (D) curve for Johnson Robot Company is
P = 3,000 40Q
(where P is the price of a robot and Q is the number of robots sold per month)
a) Find the marginal revenue (MR) function for the firm
b) Plot both
Chapter 3B
Regression Analysis
Empirical Methods
Regression analysis is a method used to estimate a
mathematical relationship between a dependent variable,
such as quantity demanded, and explanatory variables, such
as price and income.
Forecasting is t
Chapte
r8
Competitive Firms and
Markets
Four Market Structures
less
competition
Monopoly
Oligopoly
more competition
Perfect Competition
Monopolistic Competition
Market
structure
Perfect
compe ition
Monopolistic
Examples
Parts of
agriculture are
reasonab
CALCULUS REVIEW PROBLEMS (WI Answer Key) '
Rules of Differentiation
Differentiate each of the following functions, using whatever rules that are necessary:
1. y=256 y=0
2. y=5x-12 y=5
3. y=4x5 y=20x
4. y=2x6+3x+x3-42 y=12x5+12x3+3x3
s. P=5q2-4q+9 p=10q-
Chapte
r1
Introduction
Economics
is the study of how to choose to use
resources most efficiently
Managerial Economics
applies economic principles to managerial decision-making
Managerial Decision Making
Goal of a Firm?
Profit = Total
maximization
_
Chapter 6
Costs of
Production
Intro
To max = TR TC, managers must find ways to
minimize production costs
How?
(Opportunity) Costs of Production
Economic Costs = Explicit Costs + Implicit Costs
Explicit (or Accounting) Cost: direct, out-of-pocket
payment
Chapter 3A
Elasticity
Elasticity
Elasticity is useful for managerial decision making.
What is elasticity?
Elasticity measures _ _ a variable changes
in response to a change in another variable.
(e.g.) If P of iPhones 10%, Qd but by how much? 10%? 20%? 8
ECN 280 Group Exercise
Date:
Group Members Names:
Five Star Electronics, Inc. has a monopoly in tablet computer for people with disabilities. The demand
for their product is given by Q = 250 0.5P (or P = 500 2Q). The firms total cost function is given
by
Chapte
r2
Supply and Demand
Supply and Demand Model: An
Overview
Assumptions
Perfectly competitive market
Many sellers and buyers
_
_
_
ceteris paribus which means
Rational self-interest
Demand
Demand (= D Curve or D Equation)
Law of D
The P and Qd
Chapter 11
Oligopoly and
Monopolistic Competition
Four Market Structures Again
more competition
Perfect Competition
Monopolistic Competition
less competition
Monopoly
Oligopoly
Oligopoly
Characteristics
1.
A few firms (2 firms = _)
2.
3.
Rivalry among
Chapter 6
Costs of Production
Intro
To max = TR TC, managers must find ways to
minimize production costs
How?
(Opportunity) Costs of Production
Economic Costs = Explicit Costs + Implicit Costs
Explicit (or Accounting) Cost: direct, out-of-pocket
payment
Chapter 5
Production
Production Analysis
Production Process
A firm uses technology to transform _ (or factors of production)
into outputs.
Inputs
Capital (K) - land, buildings, equipment
Labor (L) skilled and less-skilled workers
Materials (M) natur
ECO 280; Group Exercise [Monopolistic Competition]
Date:
Group Members Names:
1. You are the manager of a monopolistically competitive firm. The present demand curve you face is
P = 100 4Q and your cost function is TC = 50 + 8.5Q2.
a. What level of output
ECO 280; Group Exercise [Oligopoly]
Date:
Group Members Names:
The can industry is composed of only two firms. Suppose that the demand curve for cans is
P = 100 Q
where P is the price (in cents) of a can, and Q is the quantity demanded of cans. Suppose th
Chapter 10
Pricing with Market Power
Price Discrimination (by monopoly)
Selling a product at different prices to different groups of buyers
(e.g.) airfare; 10% discount for students at a local hardware store
Why do firms practice P discrimination?
Why
Chapter 8
Competitive Firms and
Markets
Four Market Structures
less competition
Monopoly
Oligopoly
more competition
Perfect Competition
Monopolistic Competition
Characteristics of Perfect Competition
Many firms (and buyers)
Each firm is very _ relative
ECO 280 Group Exercise
Date:
Group Members:
William Howe must decide whether to start a business renting beach umbrellas at an ocean
resort during June, July and August of next summer. He believes that he can rent each
umbrella to vacationers at $5 a day,