Explain the reason for advertisement in a monopolistically competitive market.

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You are the manager of a large automobile dealership who wants to learn more about the effective- ness of various discounts offered to customers over the past 14 months. Following are the average negotiated prices for each month and the quantities sold of a basic model (adjusted for various options) over this period of time. 1. Graph this information on a scatter plot. Estimate the demand equation. What do the regression results indicate about the desirability of discounting the price? Explain. Month Price Quantity Jan. 12,500 15 Feb. 12,200 17 Mar. 11,900 16 Apr. 12,000 18 May 11,800 20 June 12,500 18 July 11,700 22 Aug. 12,100 15 Sept. 11,400 22 Oct. 11,400 25 Nov. 11,200 24 Dec. 11,000 30 Jan. 10,800 25 Feb. 10,000 28 2. What other factors besides price might be included in this equation? Do you foresee any difficulty in obtaining these additional data or incorporating them in the regression analysis?

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Chapter 14.1, Problem 9Q

To determine

Explain the reason for advertisement in a monopolistically competitive market.

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You are the manager of a large automobile dealership who wants to learn more about the effective- ness of various discounts offered to customers over the past 14 months. Following are the average negotiated prices for each month and the quantities sold of a basic model (adjusted for various options) over this period of time. 1. Graph this information on a scatter plot. Estimate the demand equation. What do the regression results indicate about the desirability of discounting the price? Explain. Month Price Quantity Jan. 12,500 15 Feb. 12,200 17 Mar. 11,900 16 Apr. 12,000 18 May 11,800 20 June 12,500 18 July 11,700 22 Aug. 12,100 15 Sept. 11,400 22 Oct. 11,400 25 Nov. 11,200 24 Dec. 11,000 30 Jan. 10,800 25 Feb. 10,000 28 2. What other factors besides price might be included in this equation? Do you foresee any difficulty in obtaining these additional data or incorporating them in the regression analysis?

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Consider options on a stock that does not pay dividends.The stock price is $100 per share, and the risk-free interest rate is 10%.Thestock moves randomly with u=1.25and d=1/u Use Excel to calculate the premium of a10-year call with a strike of $100.