Answered: (A) The monthly supply of desktop…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(A) The monthly supply of desktop personal computers is given by the equation QS = 15,000 + 43.75P. At a price of $800, what is the price elasticity of supply? Q 2. (B) The British Automobile Company is introducing a brand new model called the "London Special." Using the latest forecasting techniques, BAC economists have developed the following demand function for the "London Special": QD = 1,200,000 - 40P a) What is the point price elasticity of demand at prices of (a) $8,000 and (b) $10,000? b) Is it Elastic, Unit Elastic or Inelastic, Explain why? (A) Phoenix Lumber Company uses the number of construction permits issued to help estimate demand (sales). The firm collected the following data on annual sales and number of construction permits issued in its market area: No. of Construction Sales Year Permits Issued (000) (1,000,000) 2003 6.50 10.30 2004 6.20 10.10 2005 6.60 10.50 2006 7.30 10.80 2007 7.80 11.20 2008 8.20 11.40 2009 8.30 11.30 (a) Which variable is the dependent variable and which is the independent variable? (b) Determine the estimated regression line. (c) Calculate the coefficient of determination. Give an economic interpretation to the value obtained. (d) Suppose that 8,000 construction permits are expected to be issued in 2010. What would be the point estimate of Phoenix Lumber Company's sales for 2010? Q 3. (B) Following output for the multiple regression problem shows results as results. SUMMARY OUTPUT Regression Statistics Multiple R 0.70955 R Square 0.503461 Adjusted R Square 0.410359 Standard Error 2.130054 Observations 20 ANOVA df SS MS F Significance F Regression 3 73.60593 24.53531 5.40767 0.0092117 Residual 16 72.59407 4.537129 Total 19 146.2 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept 48.63081 6.3247384 7.688984 9.2E-07 35.222968 62.038661 Price of Coke -0.3035 0.1711745 -1.77307 0.09525 -0.6663779 0.0593694 Ad Expenditure 0.342937 0.1655882 2.071021 0.05489 -0.0080947 0.6939678 Pepsi Price 0.23406 0.1393504 1.679653 0.11244 -0.0613493 0.5294699 Find and Interpret Adjusted Coefficient of Determination, Adjusted R2, and the Correlation Coefficient, R. The ANOVA table gives the F statistic for testing the claim that there is no significant relationship between your all of your independent and dependent variables. The sig. value is your p value. Using p-value decide you should Reject or Accept claim. Write the Fitted Regression line from the results? Decide about significance using the p-value. (A) The Accuweather Corporation manufactures barometers and thermometers for weather forecasters. In an attempt to forecast its future needs for mercury, Accuweather's chief economist estimated average monthly mercury needs as: N = 500 + 10X where N = monthly mercury needs (units) and X = time period in months (January 2008= 0). The following monthly seasonal adjustment factors have been estimated using data from the past five years: Month Adjustment Factor January 15% April 10% July −20% September 5% December −10% (a) Forecast Accuweather's mercury needs for January, April, July, September, and December of 2010. (b) The following actual and forecast values of mercury needs in the month of November have been recorded: Year Actual Forecast 2008 456 480 2009 324 360 2007 240 240 Q 4. (B) Emco Company has an assembly line of fixed size A. Total output is a function of the number of workers (crew size) as shown in the following schedule: Crew Size Total Output (No. of Workers) (No. of Units) 0 0 1 10 2 35 3 50 4 56 5 59 6 60 7 60 8 58 Determine the following schedules: (a) Marginal productivity of labor (b) Average productivity of labor (c) (d) Elasticity of production with respect to labor Draw and Show relationship MPL & APL (A) During the last few days the Superior Company has been running into problems with its computer system. The last run of the production cost schedule resulted in the incomplete listing shown below. From your knowledge of cost theory, fill in the blanks. Q TC TFC TVC ATC AFC AVC MC 0 40 _____ _____ x x x x 1 _____ _____ _____ 52 _____ _____ _____ 2 _____ _____ 20 _____ _____ _____ _____ 3 _____ _____ _____ 21.33 _____ _____ _____ 4 _____ _____ _____ _____ _____ _____ 4 5 _____ _____ 40 _____ _____ _____ _____ 6 _____ _____ _____ 15.67 _____ _____ _____ 7 _____ _____ _____ _____ _____ 10 _____ 8 _____ _____ 96 _____ _____ _____ _____ 9 _____ _____ _____ _____ _____ 15 _____ 10 _____ _____ _____ _____ _____ _____ 45 Q 5. (B) Sunrise Juice Company sells its output in a perfectly competitive market. The firm's total cost function is given in the following schedule: Output Total Cost (Units) ($) 0 50 10 120 20 170 30 210 40 260 50 330 60 430 Total costs include a "normal" return on the time (labor services) and capital that the owner has invested in the firm. The prevailing market price is $7 per unit. (a) Prepare (i) marginal cost and (ii) average total cost schedules for the firm. (b) What is the firm's profit maximizing output level? (c) Is the industry in long-run equilibrium? Justify your answer. (A) A candy manufacturer has 130 pounds of chocolate-covered cherries and 170 pounds of chocolate-covered mints in stock. He decides to sell them in the form of two different mixtures. One mixture will contain half cherries and half mints by weight and will sell for $2.00 per pound. The other mixture will contain one-third cherries and two-thirds mints by weight and will sell for $1.25 per pound. How many pounds of each mixture should the candy manufacturer prepare in order to maximize his sales revenue? let us call A the mixture of half cherries and half mints, and B the mixture which is one-third cherries and two-thirds mints. Let x be the number of pounds of A to be prepared and y the number of pounds of B to be prepared. The revenue function can then be written as Since each pound of A contains one-half pound of cherries and each pound of B contains one-third pound of cherries, the total number of pounds of cherries used in both mixtures is Similarly, the total number of pounds of mints used in both mixtures is: Now, since the manufacturer can use at most 130 pounds of cherries and 170 pounds of mints, we have the constraints: Also, we must have Therefore, the above problem can be formulated as follows: find x and y that maximize subject to the constraints: Use the technique of linear programming and find feasible region of the problem and locate our extreme points. Q 6. (B) Make a linear programming graph from the following LP model and find out the most profitable solution. Maximize CM = $25A + $40B Subject to: 2A + 4B ≤ 100 hours 3A + 2B ≤ 90 A ≥ 0, B ≥ 0

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