1. Given the demand function for beef is Qx= 300-100Px+60Pp+0.01Y, where Qx is the tons ofbeef demanded in your city per week, Px is the price per pound of beef, Pp is the price per poundof pork, and Y is the average household income in the city. The supply of beef function is Qx=200+150P-30C, where Qx is the tons of beef suppliedin your city per week, Px is the price ofbeef per pound, and C is the cost of feed for cows.Assume initially, the price of pork (Pp) is $3per pound, Y=$50,000, and C=$5.a. Find the demand function Qd the given price of pork (Pp) and income (Y) and find the supplyfunction at the given cost of feed per pound (C).b. What is the equilibrium price per pound and quantity demanded of beef?c. What is price elasticity of demand for beef? Isthe demand for beef price elasticd. As the manager of the beef business, should increase or decrease the price of beef if objectiveis to increase your operating revenue?e. What is the cross-price elasticity of demand forbeef as result of a given percentage change inthe price of pork? Is the demand for beef cross-price elastic, or inelastic? Are beef and porksubstitutes or complements? How do you know?2. Suppose your marketing research department estimates the demand for your company’sproduct as: Qx= 500-11Px+0.5Y, where Qx is the quantity demanded per week, Px is the priceof product X, and Y is the average household incomeper week in the city. R2=0.87, the standarderror of the coefficients of price (Px) and household weekly income (Y) are 2 and 0.1,respectively.a. Are the coefficients of Px and Y statisticallysignificant?b. Given the initial values Px=$10 and Y=$1000, find price elasticity (Ep) and income elasticity(EY), respectively. Is the demand for the company’s product price and income elastic, orinelastic?c. What action should the manager take to increasethe company’s operating revenue?d. Is the company’s product a normal good? How do you know?e. Interpret what R2=0.87 means.3. Given the weekly price and quantity (Qx and (Px)data for Andy’s ice cream over the past 12 weeksand the price of another ice-cream flavor (Po) as: Qx848285838284878182798278Px8.509.008.759.259.509.258.2510.0010.0010.509.5010.25Po5.256.006.006.506.256.255.257.007.257.256.757.25a. Use excel regression to estimate the weekly demand for Andy’s ice-cream (attach theoutput of the regression estimate (Hint: Use regression in excel to find the estimated demandfunction: Enter the data in excel, click on Data Analysis, and use the regression command).b. Are the coefficients on the two prices statistically significantly different from zero at the 5%significance level? How do you know?c. What the R2? d. Explain what R2 means.4. A bottling company uses two inputs to produce bottles soft drink sludge: bottling machines (K) andworkers(L). The machine costs $1000 per day (r) torun and the workers are paid $200 per day (w). At thecurrent level of production, the marginal product of the machine is an additional 200 bottles per day(MPK), and the marginal product of labor is 50 bottlesper day (MPL).a. State the rule for determining the cos- efficient combinations of inputs (K & L) for the productionofsoft drinks.b. Given r=$1000 per day, w=$200 per day, (MPK)= 200 bottles, and (MPL)= 50 bottles, is the companyoperating cost efficiently?c. What must the company do to move toward cost efficient operation? Hint: use more labor or moremachines and why?5. In chapter 6, you have read the long-run averagecost (AC) of operation may decrease for three reasons.a. List and explain the three reasons why the log-run unit cost may decrease over time.b. Give an example of the learning curve for a business operation where the average costs were reduceddue to cumulative production.c. Suppose that the global learning curve for solarpower installation in the US is 93% according a recentstudy, interpret what it means?d. How might the learning curve information help businesses in making operational decision?e. Explain the concept of economies of scope. Suppose Conner runs two kind of rafting trips. If hespends all day on wild whitewater rafting, he can do 3 trips, or he can do 4 trips of a mellow wildliferafting. If he does some of each, however, he can do more total trips: 2 whitewater trips and 3 wildlifetrips. Conner’s time is valued at $20/ hour.Find the value for the economies of scope of Conner’s rafting experience. What can you say about hiseconomies of scope? Show your work.

Since you have asked multiple questions, we will solve the first question for you. If you want any…

Answered: 1. Given the demand function for beef…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Given the demand function for beef is Qx= 300-10

0Px+60Pp+0.01Y, where Qx is the tons of

beef demanded in your city per week, Px is the pric

e per pound of beef, Pp is the price per pound

of pork, and Y is the average household income in t

he city. The supply of beef function is Qx=

200+150P-30C, where Qx is the tons of beef supplied

in your city per week, Px is the price of

beef per pound, and C is the cost of feed for cows.

Assume initially, the price of pork (Pp) is $3

per pound, Y=$50,000, and C=$5.

a. Find the demand function Qd the given price of p

ork (Pp) and income (Y) and find the supply

function at the given cost of feed per pound (C).

b. What is the equilibrium price per pound and quan

tity demanded of beef?

c. What is price elasticity of demand for beef? Is

the demand for beef price elastic

d. As the manager of the beef business, should incr

ease or decrease the price of beef if objective

is to increase your operating revenue?

e. What is the cross-price elasticity of demand for

beef as result of a given percentage change in

the price of pork? Is the demand for beef cross-pri

ce elastic, or inelastic? Are beef and pork

substitutes or complements? How do you know?

2. Suppose your marketing research department estim

ates the demand for your company’s

product as: Qx= 500-11Px+0.5Y, where Qx is the quan

tity demanded per week, Px is the price

of product X, and Y is the average household income

per week in the city. R2=0.87, the standard

error of the coefficients of price (Px) and househo

ld weekly income (Y) are 2 and 0.1,

respectively.

a. Are the coefficients of Px and Y statistically

significant?

b. Given the initial values Px=$10 and Y=$1000, fin

d price elasticity (Ep) and income elasticity

), respectively. Is the demand for the company’s pr

oduct price and income elastic, or

inelastic?

c. What action should the manager take to increase

the company’s operating revenue?

d. Is the company’s product a normal good? How do y

ou know?

e. Interpret what R

=0.87 means.

3. Given the weekly price and quantity (Qx and (Px)

data for Andy’s ice cream over the past 12 weeks

and the price of another ice-cream flavor (Po) as:

8.50

9.00

8.75

9.25

9.50

9.25

10.00

10.50

9.50

10.25

5.25

6.00

6.50

6.25

5.25

7.00

7.25

6.75

7.25

a. Use excel regression to estimate the weekly dema

nd for Andy’s ice-cream (attach the

output of the regression estimate (Hint: Use regres

sion in excel to find the estimated demand

function: Enter the data in excel, click on Data An

alysis, and use the regression command).

b. Are the coefficients on the two prices statistic

ally significantly different from zero at the 5%

significance level? How do you know?

c. What the R2? d. Explain what R2 means.

4. A bottling company uses two inputs to produce bo

ttles soft drink sludge: bottling machines (K) and

workers(L). The machine costs $1000 per day (r) to

run and the workers are paid $200 per day (w). At t

current level of production, the marginal product o

f the machine is an additional 200 bottles per day

(MP

), and the marginal product of labor is 50 bottles

per day (MP

a. State the rule for determining the cos- efficien

t combinations of inputs (K & L) for the production

soft drinks.

b. Given r=$1000 per day, w=$200 per day, (MP

)= 200 bottles, and (MPL)= 50 bottles, is the compa

operating cost efficiently?

c. What must the company do to move toward cost eff

icient operation? Hint: use more labor or more

machines and why?

5. In chapter 6, you have read the long-run average

cost (AC) of operation may decrease for three reas

ons.

a. List and explain the three reasons why the log-r

un unit cost may decrease over time.

b. Give an example of the learning curve for a busi

ness operation where the average costs were reduced

due to cumulative production.

c. Suppose that the global learning curve for solar

power installation in the US is 93% according a re

cent

study, interpret what it means?

d. How might the learning curve information help bu

sinesses in making operational decision?

e. Explain the concept of economies of scope. Supp

ose Conner runs two kind of rafting trips. If he

spends all day on wild whitewater rafting, he can d

o 3 trips, or he can do 4 trips of a mellow wildlif

rafting. If he does some of each, however, he can d

o more total trips: 2 whitewater trips and 3 wildli

trips. Conner’s time is valued at $20/ hour.

Find the value for the economies of scope of Conner

’s rafting experience. What can you say about his

economies of scope? Show your work.

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