WORKSHEET (MANAGERIAL ECONOMICS)

Answer the following questions as a part of individual assignment

$ 5,000
Advertising
Rent 10,000
Taxes 5,000
Employees' salaries, 40,000
Supplies 5,000

Prepare two income Statements, one using the traditional accounting approach and one using the
opportunity cost approach to determine profit.
3. A rich uncle gives you the choice of one of the following legacies
a) $15,000 each year for the next 12 years.
b) $13,000 each year for the next 18 years.
c) $11,000 each year for the next 12 years plus a lump-sum payment of $81,000 at the end of the 18th
year.
Which would you take and why? Assume that the appropriate discount rate is 10 percent and all amounts
would be received at the end of the year.
4. Given the following supply and demand equations
Qd=100-5P
Qç=10+5P
where Qd and Qs represent the quantities demanded and supplied, respectively, and P is the price.
a) Determine the equilibrium price and quantity.
b) If the government sets a minimum price of $10 per unit, how many units would be supplied and how
many would be demanded? how could the government maintain this minimum price?
c) If the government sets a maximum price of $5 per unit, how many tin would be supplied and how
many would be demanded?
d) If demand increases to
Qd = 200- 5P
Determine the new equilibrium price and quantity.
5. Given the following total revenue (TR) and total cost (TC) equations,
TR=51Q—Q2
TC = 625 + Q
A) determine the output rate that would result in a breakeven (i.e., zero profit) situation for the firm
B) Determine the output rate that maximizes profit.
6. A firm's total revenue (TR) and total cost (TC) functions are
TR=110Q-5Q2
TC = 10Q - Q2 + 0.33Q3
Then determine
 a) Equations for marginal revenue and marginal cost
b) The output rate that maximizes total revenue.
c) The output rate that maximizes profit.
7. Determine the first and second derivatives of each of the following functions.
a) Y=10
b) Y=3X2+4X+25
c) Y = (X2 — 4)(X2 + 2X + 5
d) (X2 + 3X + 4)/(X2-4)
e) Q =100 - 0.2P2
f) R =500Q (1-5Q)
g) Y=aX2 +bX+c
h) C=2,000-200X2+3X3
i) Y = (3X - 2)2
j) Y= 3X2( 2X3 — 2)3

8. Determine all the first-order partial derivatives for each of the following functions.
a) Y = 3X2 + 2XZ + Z2
b) Q = 10K0.5 L0.6
c) Q =lOOP1 -1. 2 P2 1.5 Y 1.0
d) C = 200 + 10 X21 +2X1X2 + 3X1 2
9. Given the multivariate function
Y=50+18X+ 1OZ-5XZ--2X2
determine the values of X and Z that maximize the function.
10. The total revenue(TR) function for a firm is given by
TR = 1,000Q — 10Q2
where Q is the rate of output per period. Determine the rate of output that results in maximum total
revenue. (Be sure that you have maximized, not minimized, total revenue.)
11. A market consists of three people, A, B, and C whose individual demand equations are as follows:
A: P=35-0.5Qa
B: P=50-025Qb
C: P=40-20Qc
The industry supply equation is given by Qs = 40 + 3.5P. Determine the equilibrium price and quantity.
Determine the amount purchased by each individual.
12. For each of the following equations, determine whether demand is elastic, inelastic, or unitary elastic at
the given price.
a) Q=100-4P and P=$20.
b) Q=l500-2OP and P=$5.
c) P =50 - 0.1Q and P = $20
13. A manager believes that the demand for her product is given by the equation P =50—Q/100.
a) What is the arc elasticity of demand as price decreases from $12 to $10?
b) What is the *c elasticity of demand as price decreases from $10 to $12?
14. Write a demand equation for which the price elasticity of demand is zero for all Prices.
15. The price elasticity for rice is estimated to be -0.4 and the income elasticity is 0.8. At a price of
$0.40per pound and a per capita income of $20,000, the demand for rice is 50 million tons per year.
a) Is rice an inferior good, a necessity, or a luxury? Explain,
b) if per capita income increases to $20,500, what will be the quantity demanded rice?
 c) If the price of rice increases to $0.41 per pound and income per capita remains at at what will be
$20,000 , what will be the quantity demanded?
16. Acme Tobacco is currently selling 5000pounds of pipe tobacco per year. Due to competitive pressure:
the average price of pipe declines from $15 to $12. As a result, the demand for Acme pipe tobacco
increases to 6000 pounds per year.
a) What is the cross elasticity of demand for pipes and pipe tobacco?
b) Assuming that the cross elasticity does not change, at what price of pipes would the demand for pipe
tobacco be 3,000 pounds per year? Use $15 as the initial price of a pipe.
17. Over a six-year period, a firm's sales (millions) were $200, $220,$180,$200,$190, and $210.
a) Using a smoothing constant of 0.5, forecast sales for the next period.
b) Graph the original data. Based on the results from part (a), graph the forecasted sales. Do the
smoothed results have less variability than the original data?
c) Forecast next period sales using smoothing constants of a = 1.0 and a = 0.0. What are the implicit
assumptions associated with these smoothing constants?