1. Stan has 4 teenage daughters all in need cars. He is trying to decide how many Honda Civics (H) and/or a Toyota Camrys (T) to purchase for them. He has the following utility function over the cars:

U(H, T)=0.5H+T

The price of a Honda is $20,000 and the price of a Toyota is $24,000. If we graph the Honda Civic on the horizontal axis and Toyota Camry on the vertical axis what does the consumer’s income offer curve look like?

2. Diana has the following demand for pineapples:

When the price of pineapples is p = 4 how many pineapples does Diana demand? Round your answer to 4 decimal places.

3.

Stephanie is planning an office party. She has the following utility function for fruit and cheese:

She has an income equal to $ 50 to spend on cheese and fruit. She prices the fruit and cheese during the first week of October. At this time the price of fruit per pound $ 1 and the price of cheese per pound equals $ 3 .

During the second week of October the price of fruit increased to $ 5 . 25 per pound. If Stephanie purchases the fruit and cheese at this time what is the magnitude of the substitution effect of this price change measured in pounds of fruit? Round your answer to the fourth decimal point.

4. Stephanie is planning an office party. She has the following utility function for fruit and cheese:

She has an income equal to $ 50 to spend on cheese and fruit. She prices the fruit and cheese during the first week of October. At this time the price of fruit per pound $ 1 and the price of cheese per pound equals $ 2 .

During the second week of October the price of fruit increased to $ 6 per pound. If Stephanie purchases the fruit and cheese at this time what is the magnitude of the income effect of this price change measured in pounds of fruit? Round your answer to the fourth decimal point.

1.

Milden Company is a distributor who wants to start using a contribution format income statement for planning purposes. The company has analyzed its expenses and developed the following cost formulas:

Because shipping expense is a mixed cost, the company needs to estimate the variable shipping expense per unit sold and the fixed shipping expense per quarter using the following data:

Required:

1. Using the high-low method, estimate a cost formula for shipping expense in the form Y = a + bX.(Round the Variable cost per unit to 2 decimal places.)

2. In the first quarter of Year 3, the company plans to sell 31,000 units at a selling price of $55 per unit. Prepare a contribution format income statement for the quarter.

2.

Last year Minden Company introduced a new product and sold 25,200 units of it at a price of $92 per unit. The product's variable expenses are $62 per unit and its fixed expenses are $838,500 per year.

Required:

1. What was this product's net operating income (loss) last year?

2. What is the product's break-even point in unit sales and dollar sales?

3. Assume the company has conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price reductions in increments of $2 (e.g., $68, $66, etc.), what is the maximum annual profit that it can earn on this product? What sales volume and selling price per unit generate the maximum profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price that you determined in requirement 3?

The manufacturer of an MP3 player wanted to know whether a 10% reduction in price is enough to increase the sales of its product. To investigate, the owner randomly selected eight outlets and sold the MP3 player at the reduced price. At seven randomly selected outlets, the MP3 player was sold at the regular price. Reported below is the number of units sold last month at the regular and reduced prices at the randomly selected outlets. Regular price 138 121 123 116 116 122 132 Reduced price 143 133 151 136 144 123 130 131 Click here for the Excel Data File At the 0.010 significance level, can the manufacturer conclude that the price reduction resulted in an increase in sales? Hint: For the calculations, assume reduced price as the first sample. Compute the pooled estimate of the variance. (Round your answer to 3 decimal places.) Compute the test statistic. (Round your answer to 2 decimal places.) State your decision about the null hypothesis. Reject H0 Fail to reject H0

The manufacturer of an MP3 player wanted to know whether a 10% reduction in price is enough to increase the sales of its product. To investigate, the owner randomly selected eight outlets and sold the MP3 player at the reduced price. At seven randomly selected outlets, the MP3 player was sold at the regular price. Reported below is the number of units sold last month at the regular and reduced prices at the randomly selected outlets.

At the 0.10 significance level, can the manufacturer conclude that the price reduction resulted in an increase in sales? Hint: For the calculations, assume reduced price as the first sample.

1. Compute the pooled estimate of the variance. (Round your answer to 3 decimal places.)

2. Compute the test statistic. (Round your answer to 2 decimal places.)

3. State your decision about the null hypothesis.

• Fail to reject H₀

• Reject H₀

The manufacturer of an MP3 player wanted to know whether a 10% reduction in price is enough to increase the sales of its product. To investigate, the owner randomly selected eight outlets and sold the MP3 player at the reduced price. At seven randomly selected outlets, the MP3 player was sold at the regular price. Reported below is the number of units sold last month at the regular and reduced prices at the randomly selected outlets.

  Click here for the Excel Data File

At the 0.010 significance level, can the manufacturer conclude that the price reduction resulted in an increase in sales? Hint: For the calculations, assume reduced price as the first sample.

1. Compute the pooled estimate of the variance. (Round your answer to 3 decimal places.)

2. Compute the test statistic. (Round your answer to 2 decimal places.)

3. State your decision about the null hypothesis.

• Fail to reject H₀

• Reject H₀

The manufacturer of an MP3 player wanted to know whether a 10% reduction in price is enough to increase the sales of its product. To investigate, the owner randomly selected eight outlets and sold the MP3 player at the reduced price. At seven randomly selected outlets, the MP3 player was sold at the regular price. Reported below is the number of units sold last month at the regular and reduced prices at the randomly selected outlets.

  Click here for the Excel Data File

At the 0.100 significance level, can the manufacturer conclude that the price reduction resulted in an increase in sales? Hint: For the calculations, assume reduced price as the first sample.

1. Compute the pooled estimate of the variance. (Round your answer to 3 decimal places.)

2. Compute the test statistic. (Round your answer to 2 decimal places.)

3. State your decision about the null hypothesis.

• Reject H₀

• Fail to reject H₀

The manufacturer of an MP3 player wanted to know whether a 10% reduction in price is enough to increase the sales of its product. To investigate, the owner randomly selected eight outlets and sold the MP3 player at the reduced price. At seven randomly selected outlets, the MP3 player was sold at the regular price. Reported below is the number of units sold last month at the regular and reduced prices at the randomly selected outlets. Regular price 138 124 89 112 116 123 98 Reduced price 124 134 154 135 118 126 133 132 Click here for the Excel Data File . At the 0.025 significance level, can the manufacturer conclude that the price reduction resulted in an increase in sales? Hint: For the calculations, assume reduced price as the first sample.

Compute the pooled estimate of the variance. (Round your answer to 3 decimal places.)

Compute the test statistic. (Round your answer to 2 decimal places.)

State your decision about the null hypothesis. Reject H0 Fail to reject H0

The manufacturer of an MP3 player wanted to know whether a 10% reduction in price is enough to increase the sales of its product. To investigate, the owner randomly selected eight outlets and sold the MP3 player at the reduced price. At seven randomly selected outlets, the MP3 player was sold at the regular price. Reported below is the number of units sold last month at the regular and reduced prices at the randomly selected outlets.

  Click here for the Excel Data File

At the 0.050 significance level, can the manufacturer conclude that the price reduction resulted in an increase in sales? Hint: For the calculations, assume reduced price as the first sample.

1. Compute the pooled estimate of the variance. (Round your answer to 3 decimal places.)

2. Compute the test statistic. (Round your answer to 2 decimal places.)

3. State your decision about the null hypothesis.

• Fail to reject H₀

• Reject H₀

1. Consider a monopolist with a fixed cost of 500 and MC = 10 per unit. Demand in the market is P = 110 − q.

a. If the monopolist charges a linear price (the same price to all consumers) what is its price, quantity and profit? What is the DWL?

b. If the demand curve represents the demand for an individual consumer, if the monopolist can engage in first-degree price discrimination, what is the two-part tariff it charges? What is the resulting DWL?

c. Now again reconsider the monopolist charges a linear price (no price discrim- ination). The government decides to impose a per-unit tax of $20. What is the resulting output and price the consumers pay? What is the monopolist’s profit now that there is the tax imposed in the industry, and what is the DWL? Explain your answer, relative to part a. What is the tax revenue generated?

d. Can you suggest an alternative way the government can raise the same tax revenue in which there is less DWL than in part (c)?

1. A monopolist produces good y at a cost c(y) = 10y, so that marginal cost is a constant €10 per unit. Two distinct groups of consumers, A and B, have demands for y as follows:

            y_A(p_A) = 120 - p_A

            y_B(p_B) = 200 - p_B

1. First assume that the firm can practice third-degree price discrimination and so can set a different price for each group, p_A and p_B. Write the inverse demand functions for each group of consumers. Find the firm's optimal choice of y_A and y_B, and the associated prices for each group, p_A and p_B.
2. Now assume that the firm is not able to practice price discrimination and must set one price p for the whole market. Write total demand for the market as a whole. Write the inverse demand curve for the market as a whole. Find the firm's optimal choice of y, and the associated price p. Show that the firm does better under price discrimination as in 3.1 than under a single price as in 3.2.