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# MANAGERIAL ECONOMICS EXAM 1-12 QUESTIONS1. The following two linear

functions represent a market (thus one is a supply function, the other a demand function). Circle the answer closest to being correct. Approximately what will suppliers willingly supply if the government controls the market price to be \$3.00 ( find the market equilibrium price and quantity in order to see how the \$3.00 relates to them)?

Q = 100 - 4.6P and Q = 75 + 6.2P

2. There has been a change in the market (represented in 1 above). The change is represented by the following two equations. Circle the one correct conclusion that describes the market change.

Q = 90 + 6.2P  and Q = 110 - 4.6P

3. What function represents the marginal revenue (MR) function for this demand function: Q = 75 - 7P

4. Circle the quantity that maximizes total revenue (TR) for the marginal revenue (MR) function selected in number three (3).

5. If supply decreases but demand remains the same, we can conclude that the new equilibrium:     Answers to the following problems do not depend on any information from above.
13. If a 10% increase in the price of gas causes a 40% decrease in the demand for standard sized
autos, then the cross-price elasticity of demand is:
14. If the price elasticity of demand of for gasoline is 2.7, then a 20% increase in the quantity
demanded is caused by:
15. Suppose the price of 40 inch LCD televisions decreases by 20%. If their price elasticity of
demand is 0.85, then this price decrease will cause a:
16. A business report claims that the median home price of existing homes fell from \$300000 to
\$175000. Over the same time period the quantity demanded of these homes sold increased
from 2150000 to 4200000. Using the arc elasticity formula, calculate the arc elasticity implied.
The arc formula is:
E =
21- 22 P, +P2
P, - P2 Q1 +21
17. The demand for a product in income inelastic with an elasticity coefficient of 0.85. If there is a
25% increase in demand due to increased income, then the increase in income must be:
18. The cross price elasticity of biscotti demand with respect to the price of Lattes is -0.70 (Lattes
and biscotti are complementary goods). If the price of Lattes decreases 20%, what would you
expect to happen to biscotti demand? 19. Write your first derivative of the following function in the space on the answer sheet.
Y = 2X3 -3X2 +2X -50
20. Write the first derivative of the following function in the space on the answer sheet.
Y = 5X45+ 3X3 -2X3/2-10
Managerial Ex 1-12 May 1, 2016 The multivariate demand function (below) is needed for questions 6 - 12.
Setting: U.S. Auto manufacturers are trying to develop a multivariate function with which to
estimate the demand for their gas-electric hybrid compact cars. Here is one that Motors General
developed for its Jolt:
Qi = 65000 - 20Pj + 20Pf + 35Pt - 5Pb + 0.2Tc + 0.05Y + 10Mg + 0.04A
Where
Qi = the number of Jolts demanded per week.
Pi, = the price of each new Jolt (in \$).
Pf= the price of each new Ford gas-electric hybrid (in \$).
Pt = the price of each new Toyota gas-electric hybrid (in \$).
Pb = the price of replacement batteries for the Jolt (in \$).
To = the amount of tax credit incentive offered with the purchase of a new hybrid (in \$).
Y = average weekly disposable income of a typical Jolt purchaser (in \$).
Mg = the miles per gallon of gas rating of the Jolt (in miles per gallon).
A = average weekly Jolt advertising expenditure (in \$).
6. If all variables remain unchanged except that the price of Toyota hybrids (Pt) increases by \$500,
then the demand for Jolts will:
7. The Internal Revenue Service (IRS) decreases the amount of tax credit incentive offered (To) by
\$500. The manager of the advertising department should point out that demand for Jolts will: B. I_l' the sign of Toyota hybrids (Pt) were negative (-) instead of positive this would indicate that
Toyota hybrids are being considered { }to Jolts. 9. The partial derivative of the demand for Jolts with respect to the price of Jolts (Ej) is: 10. Enter the following values into your Jolt demand ﬁmctzion (he very careful with the calculation
because the resulting quantity ofJolts demanded will be used in several questions to follow}. Circle your answer on the answer sheet £1: \$25000 Pf: \$40000 Pt = \$35000 Pb = \$5000
Tc = \$1000 Y = \$1200 Mg = 55 A =\$70000 11. What is the point cross-price elasticity of Jolt demand with respect to the Toyota price (Pt) of
\$35000? Work out completely and show the sign {+ or -}; carry out to 3 decimal places. The
formula is: 59:1”: 61’, Q; 12. What is the point elasticity of Jolt demand with respect to the advertising expenditure {A} of
\$70000. Work out completely and show the sign (+ or -}; carry out to forn‘ decimal places.
The formula is: 6A Q!

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