Managerial Economics · End Term · Jan 2024 · FN

Suppose that Nita’s utility function is given by **u(I) = (10I)**\(^{0.5}\) , where **I** represents annual income in thousands of dollars. Suppose that Nita is currently earning an income of $40,000 (I = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. Based on the above data, answer the given subquestions.

Nita’s risk preferences are

Suppose that Nita’s utility function is given by **u(I) = (10I)**\(^{0.5}\) , where **I** represents annual income in thousands of dollars. Suppose that Nita is currently earning an income of $40,000 (I = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. Based on the above data, answer the given subquestions.

Should Nita take up the new job?

Suppose that Nita’s utility function is given by **u(I) = (10I)**\(^{0.5}\) , where **I** represents annual income in thousands of dollars. Suppose that Nita is currently earning an income of $40,000 (I = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. Based on the above data, answer the given subquestions.

If Nita is willing to join the new job and also to buy insurance to protect against the variable income associated with the new job, how much would she be willing to pay for that insurance (in $)?_________________.

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Calculate the profit-maximizing Price (in $) for this monopolist P*=________________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Calculate the profit maximizing quantity for this monopolist Q*=______________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

What will be the profit of this monopolist? Profit =________________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Suppose a second firm enters the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is now given by Q1 + Q2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit of each firm(π1,π2). Q1*= ___________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Suppose a second firm enters the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is now given by Q1 + Q2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit of each firm(π1,π2). Q2*=____________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Suppose a second firm enters the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is now given by Q1 + Q2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit of each firm(π1,π2). P*= _____________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Suppose a second firm enters the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is now given by Q1 + Q2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit of each firm(π1,π2). π1= ______________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Suppose a second firm enters the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is now given by Q1 + Q2 = 53 – P. Assuming that this second firm has the same costs as the first and the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit of each firm(π1,π2). π2= _______________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits of both the firms (π1,π2)in equilibrium. Q1*= ___________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits of both the firms (π1,π2) in equilibrium. Q2*= ___________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits of both the firms (π1,π2) in equilibrium. P*= ______________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits of both the firms (π1,π2) in equilibrium. π1= ______________

A monopolist can produce at a constant average (and marginal) cost of AC = MC = $5. It faces a market demand curve given by Q = 53 – P. Based on the above data, answer the given subquestions.

Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits of both the firms (π1,π2) in equilibrium. π2= _____________

Mohan quits his IT job, where he was earning a salary of ₹500,000 per year, to start his own restaurant business in a building that he owns and was previously renting out for ₹240,000 per year. In his first year of business, he has the following expenses: salary paid to himself, ₹400,000; rent, ₹0; other expenses, ₹250,000. Based on the above data, answer the given subquestions.

The accounting cost associated with Mohan’s restaurant business is ___________

Mohan quits his IT job, where he was earning a salary of ₹500,000 per year, to start his own restaurant business in a building that he owns and was previously renting out for ₹240,000 per year. In his first year of business, he has the following expenses: salary paid to himself, ₹400,000; rent, ₹0; other expenses, ₹250,000. Based on the above data, answer the given subquestions.

The economic cost associated with Mohan’s restaurant business is _________________

India currently imports all of its palm oil. The annual demand for palm oil by Indian consumers is given by the demand curve **Q=2500-2P**, where Q is quantity of palm oil in thousand litres and P is market price in INR per litre. World producers can harvest and ship palm oil to Indian distributors at a constant marginal cost (=average cost) of INR 100 and Indian distributors can distribute it at a cost of INR 25 per litre. Consider market for palm oil to be competitive. Indian government is considering a tariff on palm oil import of INR 25 per litre. Answer the given subquestions.

If there is no tariff, what is the quantity demanded (in thousand litres)______________

India currently imports all of its palm oil. The annual demand for palm oil by Indian consumers is given by the demand curve **Q=2500-2P**, where Q is quantity of palm oil in thousand litres and P is market price in INR per litre. World producers can harvest and ship palm oil to Indian distributors at a constant marginal cost (=average cost) of INR 100 and Indian distributors can distribute it at a cost of INR 25 per litre. Consider market for palm oil to be competitive. Indian government is considering a tariff on palm oil import of INR 25 per litre. Answer the given subquestions.

If the tariff is imposed, how much a consumer will pay for a litre of palm oil _____________

India currently imports all of its palm oil. The annual demand for palm oil by Indian consumers is given by the demand curve **Q=2500-2P**, where Q is quantity of palm oil in thousand litres and P is market price in INR per litre. World producers can harvest and ship palm oil to Indian distributors at a constant marginal cost (=average cost) of INR 100 and Indian distributors can distribute it at a cost of INR 25 per litre. Consider market for palm oil to be competitive. Indian government is considering a tariff on palm oil import of INR 25 per litre. Answer the given subquestions.

What is the new quantity demanded now (in thousand litres)? ___________

India currently imports all of its palm oil. The annual demand for palm oil by Indian consumers is given by the demand curve **Q=2500-2P**, where Q is quantity of palm oil in thousand litres and P is market price in INR per litre. World producers can harvest and ship palm oil to Indian distributors at a constant marginal cost (=average cost) of INR 100 and Indian distributors can distribute it at a cost of INR 25 per litre. Consider market for palm oil to be competitive. Indian government is considering a tariff on palm oil import of INR 25 per litre. Answer the given subquestions.

What will be the lost consumer surplus due to imposed tariff (in thousand INR) _____________

India currently imports all of its palm oil. The annual demand for palm oil by Indian consumers is given by the demand curve **Q=2500-2P**, where Q is quantity of palm oil in thousand litres and P is market price in INR per litre. World producers can harvest and ship palm oil to Indian distributors at a constant marginal cost (=average cost) of INR 100 and Indian distributors can distribute it at a cost of INR 25 per litre. Consider market for palm oil to be competitive. Indian government is considering a tariff on palm oil import of INR 25 per litre. Answer the given subquestions.

Tax revenue for the government will be (in thousand INR) ____________

India currently imports all of its palm oil. The annual demand for palm oil by Indian consumers is given by the demand curve **Q=2500-2P**, where Q is quantity of palm oil in thousand litres and P is market price in INR per litre. World producers can harvest and ship palm oil to Indian distributors at a constant marginal cost (=average cost) of INR 100 and Indian distributors can distribute it at a cost of INR 25 per litre. Consider market for palm oil to be competitive. Indian government is considering a tariff on palm oil import of INR 25 per litre. Answer the given subquestions.

Tariff results in

Two used car dealerships compete side by side on a main road. The first, Hamid’s Cars, always sells high-quality cars that it carefully inspects and, if necessary, services. On average, it costs Hamid’s $8000 to buy and service each car that it sells. The second dealership, Latif’s Motors, always sells lower-quality cars. On average, it costs Latif’s only $5000 for each car that it sells. If consumers knew the quality of the used cars they were buying, they would pay $10,000 on average for Hamid’s cars and only $7000 on average for Latif’s cars. Without more information, consumers do not know the quality of each dealership’s cars. In this case, they would figure that they have a 50-50 chance of ending up with a high quality car, and are thus willing to pay $8500 for a car. Hamid has an idea: He will offer a bumper-to-bumper warranty for all cars he sells. He knows that a warranty lasting **Y** years will cost **$500Y** on average, and he also knows that if Latif tries to offer the same warranty, it will cost Latif **$1000Y** on average. Suppose Hamid offers a one-year warranty on all of the cars he sells. Based on the above data, answer the given subquestions.

What is Latif’s profit (per car in $) if he does not offer a one-year warranty?_____________

Two used car dealerships compete side by side on a main road. The first, Hamid’s Cars, always sells high-quality cars that it carefully inspects and, if necessary, services. On average, it costs Hamid’s $8000 to buy and service each car that it sells. The second dealership, Latif’s Motors, always sells lower-quality cars. On average, it costs Latif’s only $5000 for each car that it sells. If consumers knew the quality of the used cars they were buying, they would pay $10,000 on average for Hamid’s cars and only $7000 on average for Latif’s cars. Without more information, consumers do not know the quality of each dealership’s cars. In this case, they would figure that they have a 50-50 chance of ending up with a high quality car, and are thus willing to pay $8500 for a car. Hamid has an idea: He will offer a bumper-to-bumper warranty for all cars he sells. He knows that a warranty lasting **Y** years will cost **$500Y** on average, and he also knows that if Latif tries to offer the same warranty, it will cost Latif **$1000Y** on average. Suppose Hamid offers a one-year warranty on all of the cars he sells. Based on the above data, answer the given subquestions.

What is Latif’s profit (per car in $) if he offers a one-year warranty ?___________

Two used car dealerships compete side by side on a main road. The first, Hamid’s Cars, always sells high-quality cars that it carefully inspects and, if necessary, services. On average, it costs Hamid’s $8000 to buy and service each car that it sells. The second dealership, Latif’s Motors, always sells lower-quality cars. On average, it costs Latif’s only $5000 for each car that it sells. If consumers knew the quality of the used cars they were buying, they would pay $10,000 on average for Hamid’s cars and only $7000 on average for Latif’s cars. Without more information, consumers do not know the quality of each dealership’s cars. In this case, they would figure that they have a 50-50 chance of ending up with a high quality car, and are thus willing to pay $8500 for a car. Hamid has an idea: He will offer a bumper-to-bumper warranty for all cars he sells. He knows that a warranty lasting **Y** years will cost **$500Y** on average, and he also knows that if Latif tries to offer the same warranty, it will cost Latif **$1000Y** on average. Suppose Hamid offers a one-year warranty on all of the cars he sells. Based on the above data, answer the given subquestions.

What is Hamid’s profit (per car in $) if Latif’s does not offer a one-year warranty? __________

Two used car dealerships compete side by side on a main road. The first, Hamid’s Cars, always sells high-quality cars that it carefully inspects and, if necessary, services. On average, it costs Hamid’s $8000 to buy and service each car that it sells. The second dealership, Latif’s Motors, always sells lower-quality cars. On average, it costs Latif’s only $5000 for each car that it sells. If consumers knew the quality of the used cars they were buying, they would pay $10,000 on average for Hamid’s cars and only $7000 on average for Latif’s cars. Without more information, consumers do not know the quality of each dealership’s cars. In this case, they would figure that they have a 50-50 chance of ending up with a high quality car, and are thus willing to pay $8500 for a car. Hamid has an idea: He will offer a bumper-to-bumper warranty for all cars he sells. He knows that a warranty lasting **Y** years will cost **$500Y** on average, and he also knows that if Latif tries to offer the same warranty, it will cost Latif **$1000Y** on average. Suppose Hamid offers a one-year warranty on all of the cars he sells. Based on the above data, answer the given subquestions.

What is Hamid’s profit (per car in $) if Latif’s offers a one-year warranty ?___________

Two used car dealerships compete side by side on a main road. The first, Hamid’s Cars, always sells high-quality cars that it carefully inspects and, if necessary, services. On average, it costs Hamid’s $8000 to buy and service each car that it sells. The second dealership, Latif’s Motors, always sells lower-quality cars. On average, it costs Latif’s only $5000 for each car that it sells. If consumers knew the quality of the used cars they were buying, they would pay $10,000 on average for Hamid’s cars and only $7000 on average for Latif’s cars. Without more information, consumers do not know the quality of each dealership’s cars. In this case, they would figure that they have a 50-50 chance of ending up with a high quality car, and are thus willing to pay $8500 for a car. Hamid has an idea: He will offer a bumper-to-bumper warranty for all cars he sells. He knows that a warranty lasting **Y** years will cost **$500Y** on average, and he also knows that if Latif tries to offer the same warranty, it will cost Latif **$1000Y** on average. Suppose Hamid offers a one-year warranty on all of the cars he sells. Based on the above data, answer the given subquestions.

Will Latif’s match Hamid’s one-year warranty?

Two used car dealerships compete side by side on a main road. The first, Hamid’s Cars, always sells high-quality cars that it carefully inspects and, if necessary, services. On average, it costs Hamid’s $8000 to buy and service each car that it sells. The second dealership, Latif’s Motors, always sells lower-quality cars. On average, it costs Latif’s only $5000 for each car that it sells. If consumers knew the quality of the used cars they were buying, they would pay $10,000 on average for Hamid’s cars and only $7000 on average for Latif’s cars. Without more information, consumers do not know the quality of each dealership’s cars. In this case, they would figure that they have a 50-50 chance of ending up with a high quality car, and are thus willing to pay $8500 for a car. Hamid has an idea: He will offer a bumper-to-bumper warranty for all cars he sells. He knows that a warranty lasting **Y** years will cost **$500Y** on average, and he also knows that if Latif tries to offer the same warranty, it will cost Latif **$1000Y** on average. Suppose Hamid offers a one-year warranty on all of the cars he sells. Based on the above data, answer the given subquestions.

Is it a good idea for Hamid’s to offer a one-year warranty ?

What is true about monopolistic competition

A firm can always trade three units of labour for one unit of capital and still keep output constant. The production technology for this firm can most suitably represented by

The assumption about the consistency of consumers preferences is

A manager of a clothing firm is deciding whether to add another factory in addition to one already in production. The manager would compare

Choose the correct alternative

Choose the correct alternative

A monopolist always produces in

Adverse selection occurs when

If bad drivers can usually avoid being ticketed by the police, then insurance companies will

Moral hazard occurs when contracts are written in such a way that