Chapter 2
1. The demand for MICHTECs products is related to the state of the economy. If the
economy is expanding next year (above normal GDP growth), the company expects sales
to be $110 million. If a recession occurs next year (a decline in GDP), sales
Managerial Economics 320 Spring 2012
Problem Set #3
1. Consider the following short-run production function (where L = variable input, Q = output):
Q 18L2 L3
a.
b.
c.
d.
Determine the marginal product of L function.
Determine the average product of L func
Managerial Economics 320 Spring 2012
Problem Set #4
1. Assume that a firm in a perfectly (pure) competitive industry has the following total cost
schedule:
Output (Units)
10
15
20
25
30
35
40
Total Cost ($)
220
235
245
265
295
350
420
MC
AC
a. Calculate a
Problem Set #3 Solutions:
1. a.
Q = 18L
2
3
L
2
MPL = 36L 3L
b.
2
APL = 18L L
2
2
c. Q takes on its maximum value when MPL = 0, and d Q/dL < 0:
2
36L 3L = 0
3L(12 L) = 0
L = 0 or L = 12
Therefore Q is maximized at L* = 12
d. The MPL function takes on its
Problem Set #3 Solutions:
1. a.
Q = 18L2 L3
MPL = 36L 3L2
b.
APL = 18L L2
c. Q takes on its maximum value when MPL = 0, and d2Q/dL2 < 0:
36L 3L2 = 0
3L(12 L) = 0
L = 0 or L = 12
Therefore Q is maximized at L* = 12
d. The MPL function takes on its maximum
Problem Set #2 Solutions
Question 1: Simple Linear Regression
In the study of housing demand, the county assessor is interested in developing a regression
model to estimate the market value (i.e., selling price) of residential property within her
jurisdic
Managerial Economics 320 Spring 2012
Problem Set #2
Question 1: Simple Linear Regression
In the study of housing demand, the county assessor is interested in developing a regression
model to estimate the market value (i.e., selling price) of residential p
Regression Output for Problem Set #2 Multiple Linear (Q) and Double Log (lQ) Models
Dependent Variable: Q
Analysis of Variance
Source
DF
Sum of
Mean
Squares
Square
F Value
Model
4
70229
17557
11.32
Error
20
31011 1550.53093
Corrected Total
24
101240
Pr >
Managerial Economics 320 Spring 2012
Problem Set #1
1. The demand for MICHTECs products is related to the state of the economy. If the
economy is expanding next year (above normal GDP growth), the company expects sales
to be $110 million. If a recession o
Managerial Economics 320 - Outline for Second Midterm (Chapters 4, 5, 7, 8, 9)
Chapter 4: Estimating Demand
Specifications
o Multiple linear regression
o Double log (multiplicative)
Degrees of freedom
t-test
o Tests for statistical significance of inde
Managerial Economics 320 - Outline for First Midterm (Chapters 1-4 & 4A)
Chapter 1: Introduction & Goals of the Firm
What is managerial economics?
The role of profits what do profits signal?
5 theories of why profits vary across industries
Economic pr
QB / E =
F
P V
QB / E =
F
P V
Break-even quantity
P QB / E
F
or
V
1
P
Break-even sales volume (revenue)
Qt arg et =
F +
P V
Target profit quantity
P Qt arg et or
DOL =
z=
F +
V Target profit sales volume (revenue)
1
P
( P V )Q
[( P V )Q F ]
(QB / E Q)
Deg
Formulas:
Q1 Q2
%Q Q P Q1 + Q2
ED =
=
=
%P P Q P1 P2
P1 + P2
EY =
%Q Q Y
=
%Y Y Q
EX =
%Q Q
=
%PB PB
PB
Q
%Q = E D (%P ) + EY (%Y ) + E X (%PB )
n
r = rj p j
j =1
n
(r
=
j =1
v=
z=
r
rr
j
r )2 p j
Formulas:
present value interest factor, PVIF=1/(1+i)
dollars received in n periods, the discount factor is PVIFn =[1/(1+i)]n
NPV = PV of future returns - Initial Outlay
NPV = St=0 NCFt / ( 1 + rt )t
p t = REVENUE COST = TRt TCt = PtQt VtQt - Ft
Q1 Q2
%Q
Formulas for Problem Set #2
The fitted values which lie on the linear regression => = a + b
Unexplained Sum of Squares =
Explained Sum of Squares =
Total Sum of Squares =
Standard Error of the Estimate (s.e.) =
Standard Error of the Slope Coefficient b (s