Finance 30210
Solutions to Midterm #2 Practice Questions
1) Suppose that we have the following observations of consumer behavior:
There are two products available to purchase: Cheeseburgers and Milkshakes
Observation #1: When the price of cheeseburgers wa
Finance 30210
Solutions to Midterm #1 Practice Questions
1) Suppose that you have the following demand and supply curve for rental cars:
Qd = 400 3P
Qs = 200 + 2 P
a. Solve for the equilibrium price and quantity.
Set demand equal to supply
400 3P = 200 +
Finance 30210
Quiz #9
Name_
Section_
1) Suppose that the probability of getting in an accident is 2%. The average cost of an
accident is $120,000. Suppose that the average car driver has preferences given by
U (I ) = I
a) Assuming that this individual ear
Finance 30210
Quiz #8
Name_
Section_
1) Suppose that the (inverse) market demand for fax paper is given by
P = 800 2Q
Where Q is total industry output. There are two firms that produce fax paper.
Each firm has a constant marginal cost of production equal
Finance 30210
Quiz #7
Name_
Section_
1) Consider the following game (Player ones payoffs are in bold):
Player
One
Cooperate
Cheat
Player Two
Cooperate
$17 $17
$10 $0
Cheat
$0 $20
$15 $15
a) What is each players optimal strategy? Does either player have a
Finance 30210
Quiz #5
Name_
Section_
1) Suppose that you have the following demand curve:
ln Q = 8.5 .35 ln P + .02 I
P is the current price and I is average income in thousands. Assume that average
income is equal to $80,000 and that the current price is
Finance 30210
Quiz #4
Name_
Section_
1) Suppose that you have the following technology for producing output.
11
22
y=k l
The price of labor is $5 per hour and capital costs $200 per unit. You are currently using
25 units of capital. You need to produce 50
Finance 30210
Quiz #3
Name_
Section_
1) To date, Apple has sold approximately 85M Ipads at an average retail price of $600.
With a marginal cost of approximately $300, Apple has made around $25B in profits off
the Ipad!
Empirical estimates for the elastic
Finance 30210
Quiz #2
Name_
Section_
1) Suppose that average income rises by 10% in the South Bend area. Explain using
supply and demand how this rise in income would impact the local restaurant market
(i.e. what should happen to the average price of a me
Finance 30210
Managerial Economics
Quiz #1
Name_
1) Suppose that we have the following information about productivity (in terms of
production per hour) for the following countries:
Country
France
Germany
England
Cheese (kg/hr)
2
3
8
Wine (Liters/hr)
5
6
4
Finance 30210
Problem Set #10
1)
a) Calculate the expected value and standard deviations of the two gambles.
E ( A) = .70($100 ) + .30( $200 ) = $10
SD( A) = .70($100 $10 ) + .30( $200 $10 ) = $137
2
2
E ( A) = .40($325) + .60( $200 ) = $10
SD( A) = .40($
Finance 30210
Solutions to Midterm #3 Practice Questions
1) Consider the following version of the prisoners dilemma game (Player ones
payoffs are in bold):
Player
One
Cooperate
Cheat
Player Two
Cooperate
$15 $15
$50 $0
Cheat
$0 $50
$10 $10
a) What is each