# Economics -MBA725 SKI Managerial Economics

instructions

 *COURSE INFORMATION: Instructor(s): Course Name: Managerial Economics Course Number: Course Section: Phone: Email:

Section 1 Market demand and supply

Q1 Suppose a demand function can be specified as: QW= 400-3p, evaluate the point elasticity of demand when the price is \$10. As a manager, will you continue to increase the price? Why?

(b) Imagine that your competitors increase the price of this good, as a manager, how will you respond to the price increase? Why?

Section 2: Estimating Demand and Total Revenue

Q2. (a) Use the following function:  QW= 400-2p, to estimate the maximum total revenue.

(b) Plot the average, marginal, and total revenue curves (see pp.60-61) and Homework1.

(c) What is the maximum total revenue in monetary terms?

(d) Suppose marginal cost is \$5, what will be the profit maximizing price. Remember to use the MC=MR rule and then solve for price.

Section 3 Regression Analysis

Q3  Refer to the S&P data. Using S& P as your independent variable select two companies and run a regression for the two companies while suppressing the intercept term.

(b) Interpret the results of your coefficients.

(c) Suppose you have been entrusted with the responsibility to manage a large amount of money, what managerial decision will you make in terms of investing the money in either of the companies?

Where S& P is for stock market return, AMZN is for returns on Amazon stock, AAPL is for returns on Apple stock, and  MSFT is for returns on Microsoft stock

 Year S&P AAPL MSFT AMZN 1998 28.6 2.119048 1.146035 9.6639 1999 21 1.51145 0.683641 0.42179 2000 -9.1 -0.71064 -0.62848 -0.79557 2001 -11.9 0.472269 0.527378 -0.30474 2002 -22.1 -0.34566 -0.21962 0.745841 2003 28.7 0.491277 0.058801 1.785601 2004 10.9 2.01357 -0.02375 -0.1583 2005 4.9 1.232609 -0.02133 0.064574 2006 15.9 0.180136 0.141874 -0.1631 2007 5.5 1.334748 0.19223 1.347694 2008 -37 -0.56911 -0.45393 -0.44646 2009 26.5 1.469033 0.567901 1.623245 2010 15.1 0.530665 -0.08432 0.338091 2011 2.1 0.25558 -0.06987 -0.03833 2012 16 0.314 0.028891 0.449278 2013 32.4 0.054212 0.400599 0.589628

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