1. You are the manager of a racquet club and you want to determine the best price for local rentals. Assume that the marginal cost of providing lockers is zero and the monthly demand for lockers is estimated to be best described as fitting the equation O = 100 – 2P where P is the monthly rental price and Q is the number of lockers rented per month.
a.What price would you charge?
b.How many lockers would you rent monthly at this price?
c.Explain why you chose this price?
2.Suppose the demand for what you “sell” rises relative to the supply of what you sell. (Meaning the Supply Curve does not shift.)
a.How would you know demand has increased? (What is the first piece of information which would lead you to conclude that demand has increased?) Note: I am not asking you why demand may have increased.
b. What is the first thing you would do in response to the change in this market signal?
c. What might be the second thing you would do and why?
d. What may be the benefit or danger connected with your decision to respond to the change in events and how you could decrease the “danger” and increase the “benefit?”
3. Assume that the demand for plastic surgery is price inelastic. Are the following statements true or false? Explain you answers in every case.
a. When the price of plastic surgery increases the number of operations decreases
b. The percentage change in the price of plastic surgery is less than the percentage change in quantity demanded.
c. Changes in the price of plastic surgery do not affect the number of operations.
d. Quantity demanded is quite responsive to changes in price.
e. If more plastic surgery is performed, expenditures on plastic surgery will decrease.
f. The marginal revenue of another operation is negative.
4. In the section of your text which deals with what is called “The Logic of Group Behavior,” one practical application addresses “the value of tough bosses.” In the full context of basic microeconomic theory (also known as the “theory of the firm”) discuss in depth the argument about the “value of tough bosses,” specifically about the issues which deal with possible worker behavior in large groups such as a business firm, and the various kinds of effects of worker behavior on the goals of the firm.
Thank you :)
Angela Higgins 423-827-5380