Topic: Managerial Economics

"The higher the rate of interest the lower is the present value. So also the further in the future the amount payable is, the less the present value of the amount".

Please explain the above meaning of this line.

In 2003, Porsche unveiled its new sports utility vehicle (SUV), the Cayenne. With a price tag of $40,000 (2003 dollars), the Cayenne went from zero to 62mph in 9.7 seconds. Porsche’s decision to enter the SUV market was a response to the runaway success of other high-priced SUVs such as the Mercedes Benz M-Class. Vehicles in this class had generated years of high profits. The Cayenne certainly spiced up the market, and Porsche subsequently introduced the Cayenne Turbo S, which goes from zero to 60 mph in 3.8 seconds and has a top speed of 176 mph. The price tag of the Cayenne Turbo S in 2018 was around $130,000.

Some analysts questioned Porsche’s entry into the luxury SUV market. The analysts were concerned not only that Porsche was a late entry into the market, but also that the introduction of the Cayenne would damage Porsche’s reputation as a maker of high-performance automobiles.

Question: In evaluating the Cayenne, what do you think Porsche needs to assume regarding the substantial profit margins that exist in this market? Is it likely they will be maintained as the market becomes more competitive, or will Porsche be able to maintain the profit margin because of ots image and the performance of the Cayenne?

Suppose SFU has figured out a way to deliver the lectures all around the world in a way that creates a demand for their lectures because in some way they're better than the lectures that you could get from other universities. They evaluate the demand in Korea and demand in Germany. The demands are as follows:

PK = 5,000 – 0.5QK

PG = 3,000 – 0.5QG

where PK and PG are the prices per course (per student) in Korea and Germany, respectively, and QK and QG are the number of students in Korea and Germany willing to enroll at those prices, respectively.

The cost of online delivery is C = 1,800Q, where Q is the total number of students enrolled (i.e., Q = QK + QG).

But the university probably would get the idea that it's not that difficult to distinguish students in Germany from students in Korea by checking, for instance, their citizenship documents when they register for the course and/or checking the location of their ISP (i.e., the university could solve the identification problem on the group level, i.e., tell whether a student is in Germany or in Korea and the university does not really face an arbitrage problem).

SFU decides to practice the 3rd degree (linear) price discrimination.

6. What price would SFU charge in Germany?

7. What price would SFU charge in Korea?

8. What would be their online enrollment in Korea?

9. What would be their online enrollment in Germany?

10. What would be their total online enrollment?

11. What would be the combined surplus in all the markets? I.e., what is the sum of the consumer surplus in Korea, consumer surplus in Germany, and SFU’s producer surplus from selling the instruction in both countries?

Discuss why firms have differing costs structures. Example of firms costs structure.

do the ends justify the means in the goldman sachs case, as it turns out? explain and offer evidence.

Politicians are often blamed when the economy is shrinking. If a politician stated, "We are going to keep trying things until we find something that works," is that a good idea or strategy for the economy? for the politician? Why or why not?  

ONLY ANSWER PLEASE!

Assume the income elasticity of a car is 0.75. If consumer income increases by 5%, the quantity demanded would _______ by _______.
a) increase 5.75%
b) increase, 3.75%
c) increase, 1.33%
d) decrease, 3.75%
e) increase, 4.25%

The cross-price elasticity of demand between butter and margarine is 2.45. This indicates that the two goods are substitutes.
a) True
b) False

Assuming nothing else changes, when the cost of an input decreases, a firm’s per-unit profit _______ and the firm will offer _______ amounts for sale at every price.
a) increases, decreased
b) decreases, increased
c) increases, increased
d) decreases, decreased

A price ceiling causes the actual number of units of a good bought and sold to decrease compared to the equilibrium quantity. A price floor causes the actual number of units bought and sold to increase compared to the equilibrium quantity.
a) True
b) False

Which of the following explains why the Ford Motor Company decided to focus on producing trucks and sport utility vehicles (SUVs) instead of automobiles?
a) There was a decline in productivity in the factories making trucks and SUVs.
b) The government increased tax rates on Ford.
c) The cost of inputs used in making trucks increased.
d) The price of a substitute in production decreased.

Which of the following is true regarding the production possibility frontier model? There is more than one correct answer to this question. You must mark all of the correct answers to receive full credit for this question.
a) Resource use is efficient in producing all of the combinations shown on a PPF.
b) The PPF always slopes down because resources are limited.
c) If resources are not specialized, the PPF will be a straight, downward-sloping line.
d) The principle of increasing marginal opportunity cost only applies in cases when resources are specialized.
e) Using only the PPF model, it is not possible to state that any one combination on a frontier is superior to any other combination on the same frontier.

Which of the following would cause a definite leftward shift of the demand curve?
a) an expectation by consumers of a lower price and an increase the price of a complement
b) a decrease in the number of consumers and a decrease in income (assume an inferior good)
c) a decrease in income and a positive change in consumer tastes
d) an expectation by consumers of lower income and an increase in the price of a substitute

While an increase in the price of a substitute causes the _______ curve to shift _______ an increase in the price of a substitute in production causes the _______ curve to shift _______.
a) demand left, supply, right
b) demand, right, supply, right
c) demand, right, supply, left
d) demand, left, supply, left

A former student of mine had four job offers upon graduation. The salaries of these four positions were $54,000, $58,000, $62,000, and $68,000. He decided to go with the job that paid $62,000. What was the opportunity cost of his decision?
a) $4,000
b) $180,000
c) $68,000
d) $54,000
e) $0

Which of the following will result in a definite decrease in equilibrium quantity but an uncertainty regarding any change that might occur in the equilibrium price?
a) a decrease in demand and an increase in supply
b) an increase in demand and a decrease in supply
c) an increase in demand and an increase in supply
d) a decrease in demand and a decrease in supply

10. According to the efficient markets hypothesis, *

in the short run, it is best to buy high and sell low.

anyone can outperform the stock market indices (indexes).

no investor can regularly outperform the stock market indices (indexes).

when one investor outperforms a stock market index, another investor will underperform that index.

11. All important information about the use (value) of a good is captured *

in its price.

by a central planner.

in its ceteris paribus.

by the Federal Trade Commission.

12. In relation to a bundle of two products where the prices have not changed, if a budget constraint increases, then the consumer can afford *

less of both products.

the same amount of both products.

more of both products.

cannot be determined, because information about indifference curves is needed

13. When are hourly rates preferred to piece rates? *

When employees demand it

When it is difficult to measure output

When wage equality isn't very important

When one person is much better than the rest

14. Which of the following best illustrates the concept of diminishing marginal utility? *

Elton likes carrots more than Mariah. Mariah gets less utility from carrots than Elton.

Whitney likes cashews more than Billy. Whitney gets more utility from cashews than Billy.

Tina is hungry and the first piece of chocolate she eats tastes great. Although she enjoys her fifth piece of chocolate, it does not taste as great.

Taylor likes hamburgers, but the price she is willing to pay for them is low compared with higher end foods, such as steak and lobster.

15. Non-monetary incentives are *

not important and should not be used.

not important, but are often used.

important, but should not be used.

important and should be used.

16. When a speculative bubble bursts *

unemployment usually decreases.

there is a "boom" in the overall economy.

the effects are contained only in that specific market.

people feel worse off because of lower stock prices and often spend less.

17. Speculation is *

wondering about the meaning of life.

a disruption of the normal market mechanism.

the attempt to profit from future price changes.

ignoring price signals and guessing randomly (wildly) about the future.

18. The difference between what buyers pay for a unit of a good and what sellers receive is known as the *

brokerage fee.

tax (tax wedge).

cost of production.

interest (interest rate).

The news reports the profits or losses of major businesses each quarter. What do you think when you hear that a corporation like Microsoft or BP has made billions of dollars in the last year? Does Adam Smith's Invisible Hand theory really help our economy and our society? Major corporations aside, what about the thousands of small businesses across the U.S. Are their profits justified, and do their profits help society through their taxes and corporate social responsibility? Last thought--if our country were to move to Socialism and our taxes increase, what effect will that have on our country's businesses?

On January 1, Portillo, Inc. lends a corporate customer $156,000 at 5% interest. The amount of interest revenue that should be recorded for the quarter ending March 31 equals:

Multiple Choice

• $7,800.

• $650.

• $2,600.

• $1,950.

18. The difference between what buyers pay for a unit of a good and what sellers receive is known as the *

brokerage fee.

tax (tax wedge).

cost of production.

interest (interest rate).

19. Diversification does which of the following? *

Reduces expected returns

Does not impact expected returns

Increases expected returns

20. When businesses pay their sales people based on their performance relative to their peers, this is known as *

salary pay.

a tournament.

a piece rate system.

a compensation rate schedule.

21. When inside information becomes public information, profit opportunities *

decrease.

remain the same.

increase.

change, but the direction cannot be determined.

22. Diversification is an investment strategy to *

minimize risks in personal banking.

maximize returns in bond investments.

reduce the risk of a given investment portfolio.

outperform the DJIA (Dow Jones Industrial Average).

23. __________ determine(s) whether buyers or sellers ultimately bear the majority of the tax burden. *

The amount of a tax

Whom a tax is originally imposed (placed) on

The relative elasticities of demand and supply

The type of tax (such as a commodity tax or a sales tax)

24. An increase in the price of a product leads to *

a decrease in the marginal utility per dollar (MU/P) of that product, which leads to a decrease in the quantity purchased.

a decrease in the marginal utility per dollar (MU/P) of that product, which leads to an increase in the quantity purchased.

an increase in the marginal utility per dollar (MU/P) of that product, which leads to a decrease in the quantity purchased.

an increase in the marginal utility per dollar (MU/P) of that product, which leads to an increase in the quantity purchased.

25. As indifference curves move northeast (to the upper right), bundles of goods along those indifference curves will yield *

lower utility.

the same utility.

higher utility.

utility that is sometimes higher, sometimes the same, and sometimes lower.

List at least three ways that gang attempts to mitigate the externalities it generates from the sale of drugs. In addition list at least three externalities that gang activities generate within the local community

2. What are the determinants of demand? What happens to the demand curve when any of these determinants change? Distinguish between a change in demand and a movement along a fixed demand curve, noting the cause(s) of each. LO3.2

3. Explain the law of supply. Why does the supply curve slope upward? How is the market supply curve derived from the supply curves of individual producers? LO3.3

4. What are the determinants of supply? What happens to the supply curve when any of these determinants change? Distinguish between a change in supply and a change in the quantity supplied, noting the cause(s) of each. LO3.3

5. In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the supply of cattle hides, hide prices, the supply of leather goods, and the price of leather goods? LO3.5

6. For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm’s shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change? LO3.5