Managerial Economics And Business Strategy 10th International Edition Michael Baye, Jeff Prince - Solutions

Unlock the full potential of your "Managerial Economics and Business Strategy" textbook with our comprehensive solutions and answers. Access the online answers key and solution manual for step-by-step insights into each chapter. Our platform offers a solutions PDF, featuring solved problems and detailed questions and answers, perfect for exam preparation with the test bank. Benefit from the instructor manual, ensuring a thorough understanding of the material. Enjoy the convenience of a free download, providing chapter solutions and textbook insights at your fingertips. Elevate your learning with these invaluable resources, designed to enhance your academic success.

6. Evaluate this statement: “If the United States imposed a uniform excise tariff on all foreign imports, all U.S. businesses and workers would benefit. Consequently, if a bill to impose a uniform excise tariff were introduced in the U.S. Congress, it would unanimously pass.” (LO1)
5. Canada’s forestry industry (composed mainly of those involved in the lumber industry)directly employs about 370,000 workers and indirectly employs an additional 510,000 people in support services. Forestry products account for nearly 3 percent of Canada’s gross domestic product (GDP) and
4. After seven years of negotiations, 12 countries—including the United States, Japan, Vietnam, and nine other Pacific Rim countries—crafted the Trans-Pacific Partnership(TPP). A key feature of the TPP was the lifting of tariffs on many products traded between the member countries, ranging from
3. China’s entry into the World Trade Organization (WTO) in 2001 created more competition between local and foreign firms, and also provided China greater access to the market for exports. This was particularly true in the market for rubber since, at the time, China was the world’s second
2. Suppose that the U.S. Congress passes legislation that imposes a one-time lump-sum tariff on the product that a foreign firm exports to the United States. (LO1)a. What happens to the foreign firm’s marginal cost curve as a result of the lump-sum tariff?b. Will the lump-sum tariff cause the
1. Consider a competitive market served by many domestic and foreign firms. The domestic demand for these firms’ product is Qd = 600 − 2P. The supply function of the domestic firms is QSD = 200 + P, while that of the foreign firms is QSF = 250. (LO1)a. Determine the equilibrium price and
9. Suppose that, prior to the passage of the Truth in Lending Simplification Act and Regulation Z, the demand for consumer loans was given by Q pre-TILSA d= 12 − 100P(in billions of dollars) and the supply of consumer loans by credit unions and other lending institutions was Q pre-TILSA S= 5 +
8. Enrodes is a monopoly provider of residential electricity in a region of northern Michigan. Total demand by its 3 million households is Qd = 1,500 − 2P, and Enrodes can produce electricity at a constant marginal cost of $4 per megawatt-hour. Consumers in this region of Michigan have recently
7. Section 16(a) of the Securities and Exchange Act of 1934, as amended in 1990, requires that the officers, directors, and principal shareholders of companies disclose the extent of their ownership of equity securities of the company and any changes in the ownership.Section 16(b) permits companies
6. You are the manager of a paper mill and have been subpoenaed to appear before a joint session of the Senate Consumer Affairs and the Senate Environmental subcommittees.The Consumer Affairs Subcommittee is interested in your testimony about the pricing practices of your company because a recent
5. A well-known conglomerate that manufactures a multitude of noncompeting consumer products instituted a corporatewide initiative to encourage the managers of its many divisions to share consumer demographic information. However, since the initiative was implemented, the CEO has noticed that less
4. Is “fairness” the economic basis for government laws and regulations designed to remedy market failures? If so, why; if not, what is the economic basis? (LO1)
3. Explain, using precise economic terminology, the economic rationale for laws against insider trading. (LO3)
2. There are two workers. Each worker’s demand for a public good is P = 20 − Q. The marginal cost of providing the public good is $24. The accompanying graph summarizes the relevant information. (LO2)a. What is the socially efficient quantity of the public good?b. How much will each worker have
1. You are an industry analyst who specializes in an industry where the market inverse demand is P = 200 − 4Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 12Q. (LO1)a. What is the socially efficient level of output?b. Given these
9. The Federal Trade Commission (FTC) issued a complaint against Nestlé and Ralston Purina alleging that a proposed merger between the two companies would violate, among other things, section 7 of the Clayton Act. While these two companies sell many products that raise no antitrust concerns, the
8. Moses Inc. is a small electric company that provides power to customers in a small rural area in the Southwest. The company is currently maximizing its profits by selling electricity to consumers at a price of $0.15 per kilowatt-hour. Its marginal cost is $0.05 per kilowatt-hour, and its average
7. Social Dynamo Corporation earned profits last year of $49 million on sales of $500 million. During the same period, its major competitor—EIO Corp.—enjoyed sales of$490 million and earned profits of $52 million. Currently, Social Dynamo is negotiating a deal in which it would acquire the
6. Between 1972 and 1981, Texaco sold gasoline to independent Texaco retailers at “retail tank wagon prices” but granted substantial discounts to distributors Gull and Dompier.Gull resold the gas under its own name. Dompier resold the gas under the Texaco brand name to retail stations and
5. The fighters of the Ultimate Fighting Championship (UFC) filed suit against the UFC, alleging that the UFC unlawfully monopolized the output and input markets in mixed martial arts. In particular, the fighters claimed that UFC used long-term exclusive contracts to permanently lock them into the
4. The accompanying diagram depicts a monopolist whose price is regulated at $10 per unit. Use this figure to answer the questions that follow. (LO1)a. What price will an unregulated monopoly charge?b. What quantity will an unregulated monopoly produce?c. How many units will a monopoly produce when
3. As the manager of a monopoly, you face potential government regulation. Your inverse demand is P = 40 − 2Q, and your costs are C(Q) = 8Q. (LO1, LO2)a. Determine the monopoly price and output.b. Determine the socially efficient price and output.c. What is the maximum amount your firm should be
2. Use the accompanying graph to answer the questions that follow. (LO1)a. Suppose this monopolist is unregulated.(1) What price will the firm charge to maximize its profits?(2) What is the level of consumer surplus at this price?b. Suppose the firm’s price is regulated at $80.(1) What is the
1. You are the manager in a market composed of eight firms, each of which has a 12.5 percent market share. In addition, each firm has a strong financial position and is located within a 100-mile radius of its competitors. (LO1)a. Calculate the premerger Herfindahl-Hirschman index (HHI) for this
5. Bank 1 and Bank 2 are considering entering a compatibility agreement that would permit the users of each bank’s automated teller machines (ATMs) access to the other bank’s ATMs. Bank 1 has a network of branches and ATMs extending from Connecticut to Florida. Bank 1’s 12 million customers
4. During the dot-com era, mergers among some brokerage houses resulted in the acquiring firm paying a premium on the order of $100 for each of the acquired firm’s customers.Is there a business rationale for such a strategy? Do you think these circumstances are met in the brokerage business?
3. During the early days of the Internet, most dot-coms were driven by revenues rather than profits. A large number were even driven by “hits” to their site rather than revenues.This all changed in early 2000, however, when the prices of unprofitable dot-com stocks plummeted on Wall Street.
2. On November 18, 2012, Nintendo released its eighth-generation video game console, the Wii U. In November 2013, Microsoft and Sony followed suit by releasing the Xbox One and PlayStation 4, respectively. Although these three video game consoles have dominated the video game console market, new
1. A firm is considering building a two-way network that links 12 users. The cost of building the network is $10,000. (LO1)a. How many potential connection services does this network provide?b. If each user is willing to pay $150 to connect to the network, will the firm profit by building the
4. Tom Jackson has been running a successful steakhouse that specializes in serving upscale steak dinners. His current marketing campaign targets residential households.Recently, it was announced that a new conference hotel was to open near his steakhouse, bringing in many potential business
3. You are the manager of 3D Designs—a large imaging company that does graphics and web design work for companies. You and your only competitor are contemplating the purchase of a new 3-D imaging device. If only one of you acquires the device, that firm will earn profits of $20 million and the
2. In the following game, determine the maximum amount you would be willing to pay for the privilege of moving (a) first, (b) second, or (c) third: There are three players, you and two rivals. The player announcing the largest integer gets a payoff of $10, that announcing the second largest integer
1. Consider the following simultaneous move game: (LO1)Player 2 Strategy Yes No Player 1 Yes 400, 400 200, 375 No 600, 500 300, 525a. What is the maximum amount player 1 should be willing to pay for the opportunity to move first instead of moving at the same time as player 2? Explain carefully.b.
11. Discuss how price discrimination can enhance the effectiveness of predatory pricing and strategies that raise rivals’ costs. (LO1, LO3)
10. Evaluate the following: “Since a rival’s profit-maximizing price and output depend on its marginal cost and not its fixed costs, a firm cannot profitably lessen competition by implementing a strategy that raises its rival’s fixed costs.” (LO2)
9. The CEO of a regional airline recently learned that its only competitor is suffering from a significant cash-flow constraint. The CEO realizes that its competitor’s days are numbered but has asked whether you would recommend the carrier significantly lower its airfares to “speed up the
8. In 2015 Qualcomm Inc., an American multinational semiconductor company, came under scrutiny for its business practices by the United States and the European Union. It was argued that Qualcomm was paying a major customer to exclusively use its chips. In addition, Qualcomm was accused of selling
7. Argyle is a large, vertically integrated firm that manufactures sweaters from a rare type of wool produced on its sheep farms. Argyle has adopted a strategy of selling wool to companies that compete against it in the market for sweaters. Explain why this strategy may, in fact, be rational. Also,
6. A number of professional associations, such as the American Medical Association and the American Bar Association, support regulations that make it more costly for their members (e.g., doctors and lawyers) to practice their services. While some of these regulations may stem from a genuine desire
5. Between 1995 and 1997, American Airlines competed in the Dallas/Ft. Worth Airport against several other low-cost carriers. In response to these low-cost carriers, American Airlines reduced its price and increased service on selected routes. As a result, one of the low-cost carriers stopped
4. You are the manager of an international firm headquartered in Antarctica. You are contemplating a business tactic that will permit your firm to raise prices and increase profits in the long run by eliminating one of your competitors. Do you think it would make economic sense to expend resources
3. Two firms compete in a homogeneous product market where the inverse demand function is P = 20 − 5Q (quantity is measured in millions). Firm 1 has been in business for one year, while firm 2 just recently entered the market. Each firm has a legal obligation to pay one year’s rent of $2
2. The market for taxi services in a Midwestern town is monopolized by firm 1. Currently, any taxi services firm must purchase a $40,000 “medallion” from the city in order to offer its services. A potential entrant (firm 2) is considering entering the market. Because entry would adversely
1. Two firms compete in a Cournot fashion. Firm 1 successfully engages in an activity that raises its rival’s marginal cost of production. (LO2)a. Provide two examples of activities that might raise rivals’ marginal costs.b. In order for such strategies to be beneficial, is it necessary for the
23. Prosecutors representing the Securities and Exchange Commission recently announced criminal charges against 13 individuals for engaging in insider trading. According to the SEC’s director of enforcement, a trading ring acting on inside information “compromises the markets’ integrity and
22. Online MBA programs significantly reduce the cost to existing managers of obtaining an MBA, as they permit students to maintain their existing residence and employment while working toward an advanced degree in business. Based on your knowledge of the economics of information and student
21. You are considering a $500,000 investment in the fast-food industry and have narrowed your choice to either a McDonald’s or a Penn Station East Coast Subs franchise.McDonald’s indicates that, based on the location where you are proposing to open a new restaurant, there is a 25 percent
20. Recently the pharmaceutical company Mylan attempted a hostile takeover of generic drugmaker Perrigo. Perrigo reported a net loss the year before the attempted takeover, which was partially driven by a spike in administrative expenses. Suppose that Mylan perceives there is a 70 percent
19. CPT Inc. is a local manufacturer of conveyor systems. Last year, CPT sold over $2 million worth of conveyor systems that netted the company $100,000 in profits. Raw materials and labor are CPT’s biggest expenses. Spending on structural steel alone amounted to over $500,000, or 25 percent of
18. Pelican Point Financial Group’s clientele consists of two types of investors. The first type of investor makes many transactions in a given year and has a net worth of over$2.5 million. These investors seek unlimited access to investment consultants and are willing to pay up to $25,000
17. This past year, Used Imported Autos sold very few cars and lost over $500,000. As a consequence, its manager is contemplating two strategies to increase its sales volume.The low-cost strategy involves changing the dealership name to Quality Used Imported Autos to signal to customers that the
16. From the late 1990s through the early 2000s, more than 25 domestic steel companies filed for bankruptcy. A combination of low prices with strong competition by foreign competitors and so-called legacy costs of unions are cited as the primary reasons why so many steel companies filed for
15. Congress enacted the Health Insurance Portability and Accountability Act (HIPAA) to potentially help millions of employees gain access to group health insurance. The key provision of HIPAA requires insurance companies and health insurance plans administered by employers who self-insure to
14. BK Books is an online book retailer that also has 10,000 “bricks-and-mortar” outlets worldwide. You are a risk-neutral manager within the Corporate Finance Division and are in dire need of a new financial analyst. You only interview students from the top MBA programs in your area. Thanks to
13. Life insurance companies require applicants to submit to a physical examination as proof of insurability prior to issuing standard life insurance policies. In contrast, credit card companies offer their customers a type of insurance called “credit life insurance”that pays off the credit
12. As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 60 percent
11. The FCC has hired you as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its goal of using auctions to sell these spectrum rights is to generate revenue. Since most bidders are large telecommunications companies, you rationally surmise that all
10. Life insurance policies typically have clauses stipulating the insurance company will not pay claims arising from suicide for a specified term—typically two years from the date the policy was issued. Use precise economic terminology to explain the likely impact on an insurance company’s
9. An advertisement in the local paper offers a “fully loaded” car that is only six months old and has only been driven 5,000 miles at a price that is 20 percent lower than the average selling price of a brand new car with the same options. Use precise economic terminology to explain whether
8. The text points out that asymmetric information can have deleterious effects on market outcomes. (LO3)a. Explain how asymmetric information about a hidden action or a hidden characteristic can lead to moral hazard or adverse selection.b. Discuss a few tactics that managers can use to overcome
7. You are one of five risk-neutral bidders participating in an independent private values auction. Each bidder perceives that all other bidders’ valuations for the item are evenly distributed between $30,000 and $70,000. For each of the following auction types, determine your optimal bidding
6. You are a bidder in an independent private values auction, and you value the object at$3,000. Each bidder perceives that valuations are uniformly distributed between $1,500 and $9,000. Determine your optimal bidding strategy in a first-price, sealed-bid auction when the total number of bidders
5. A risk-neutral consumer is deciding whether to purchase a homogeneous product from one of two firms. One firm produces an unreliable product and the other a reliable product.At the time of the sale, the consumer is unable to distinguish between the two firms’products. From the consumer’s
4. You are the manager of a firm that sells a “commodity” in a market that resembles perfect competition, perfect competition, and your analytics team estimates that your cost function is C(Q) = 2Q + 3Q2. Unfortunately, due to production lags, you must make your output decision prior to knowing
3. Your store sells an item desired by a consumer. The consumer is using an optimal search strategy; the accompanying graph shows the consumer’s expected benefits and costs of searching for a lower price. (LO1)a. What is the consumer’s reservation price?b. If your price is $3 and the consumer
2. For each of the following scenarios, determine whether the decision maker is risk neutral, risk averse, or risk loving. (LO1)a. A manager prefers a 20 percent chance of receiving $1,400 and an 80 percent chance of receiving $500 to receiving $680 for sure.b. A shareholder prefers receiving $920
1. Consider the two options in the following table, both of which have random outcomes: (LO1)Option 1 Option 2 Probability of Outcome Possible Outcomes ($)Probability of Outcome Possible Outcomes ($)1/16 150 1/5 120 4/16 300 1/5 255 6/16 750 1/5 1,500 4/16 300 1/5 255 1/16 150 1/5 120a. Determine
25. As an online video commentator, you are committed to offering your videos without ads. Until now, you’ve experimented with different per-video prices for your content and collected user-level data on the number of videos viewed in a week at different prices in the file Q11-25.xls.a. Using
24. Your company just became international, by offering its products in both the United States and Canada. Experts in your analytics department believe that tastes for your product differ in those two countries and have carefully collected data on prices and quantity demanded in both countries.
23. You manage a company that competes in an industry that is comprised of four equalsized firms that produce similar products. A recent industry report indicates that the market is fairly saturated in that a 10 percent industrywide price increase would lead to an 18 percent decline in units sold
22. An analyst for FoodMax estimates that the demand for its Brand X potato chips is given by ln Q Xd = 12.14 – 2.8ln PX + 3.4PY + 0.7ln AX, where QX and PX are the respective quantity and price of a four-ounce bag of Brand X potato chips, PY is the price of a sixounce bag sold by its only
21. Suppose the European Union (EU) is investigating a proposed merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another
20. Heathrow Airport Holdings is a private company that operates Heathrow Airport in London. Suppose the company recently commissioned your consulting team to prepare a report on traffic congestion at Heathrow. Your report indicates that Heathrow is more likely to experience significant congestion
19. Many home improvement retailers like Home Depot and Lowe’s have low-price guarantee policies. At a minimum, these guarantees promise to match a rival’s price, and some promise to beat the lowest advertised price by a given percentage. Do these types of pricing strategies result in cutthroat
18. As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand
17. Blue Skies Aviation is a manufacturer of small single-engine airplanes. The company is relatively small and prides itself on being the only manufacturer of customized airplanes.The company’s high standard of quality is attributed to its refusal to purchase engines from outside vendors, and it
16. You own a franchise of rental car agencies in Florida. You recently read a report indicating that about 80 percent of all tourists visit Florida during the winter months in any given year and that 60 percent of all tourists traveling to Florida by air rent automobiles.Travelers not planning
15. The American Baker’s Association reports that annual sales of bakery goods last year rose 15 percent, driven by a 50 percent increase in the demand for bran muffins. Most of the increase was attributed to a report that diets rich in bran help prevent certain types of cancer.You are the
14. According to International Data Corporation (IDC), the number of worldwide smartphone owners will soon exceed 3 billion. That number is expected to grow at nearly 10 percent per year for the next five years. While the actual cost of a smartphone is about$300, wireless carriers in some countries
13. You are the manager of a local sporting goods store and recently purchased a shipment of 60 sets of skis and ski bindings at a total cost of $25,000 (your wholesale supplier would not let you purchase the skis and bindings separately, nor would it let you purchase fewer than 60 sets). The
12. You are a pricing analyst for QuantCrunch Corporation, a company that recently spent $15,000 to develop a statistical software package. To date, you only have one client. A recent internal study revealed that this client’s demand for your software is Q d = 300 – 0.2P and that it would cost
11. You are the owner of a local Honda dealership. Unlike other dealerships in the area, you take pride in your “no-haggle” sales policy. Last year, your dealership earned record profits of $1.3 million. In your market, you compete against two other dealers, and the market-level price
10. Does the presence of online auction sites, such as eBay, make it easier or harder for traditional retailers and wholesalers to engage in profitable price discrimination?Explain. (LO2)
9. According to some translations, Nobel Laureate Albert Einstein once said, “God does not play dice with the universe.” Does this mean that a profit-maximizing firm would never use something like dice or a roulette wheel to help shape its pricing decisions?Explain. (LO4)
8. A large firm has two divisions: an upstream division that is a monopoly supplier of an input whose only market is the downstream division that produces the final output. To produce one unit of the final output, the downstream division requires one unit of the input.If the inverse demand for the
7. You are the manager of a firm that produces products X and Y at zero cost. You know that different types of consumers value your two products differently, but you are unable to identify these consumers individually at the time of the sale. In particular, you know there are three types of
6. A monopoly is considering selling several units of a homogeneous product as a single package. Analysts at your firm have determined that a typical consumer’s demand for the product is Qd = 80 − 0.5P, and the marginal cost of production is $100. (LO2)a. Determine the optimal number of units
5. You are the manager of a monopoly. Your analytics department estimates that a typical consumer’s inverse demand function for your firm’s product is P = 200 − 20Q, and your cost function is C(Q) = 80Q. (LO2)a. Determine the optimal two-part pricing strategy.b. How much additional profit do
4. You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that group 1’s elasticity of demand is −3, while group 2’s is −5. Your marginal cost of producing the product is $40. (LO1, LO2)a.
3. You are the manager of a firm that charges customers $16 per unit for the first unit purchased and $12 per unit for each additional unit purchased in excess of one unit.The accompanying graph summarizes your relevant demand and costs. (LO2)a. What is the economic term for your firm’s pricing
2. Based on the following graph (which summarizes the demand, marginal revenue, and relevant costs for your product), determine your firm’s optimal price, output, and the resulting profits for each of the following scenarios: (LO2)a. You charge the same unit price to all consumers.b. You engage
1. Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is –3. The marginal cost of producing the product is constant at$100, while average total cost at current production levels is $175. Determine your optimal per unit price if: (LO1)a.
23. You manage a company that competes in an industry that is comprised of five equal-sized firms. A recent industry report indicates that a tariff on foreign imports would boost industry profits by $30 million—and that it would only take $5 million in expenditures on (legal) lobbying activities
22. An office manager is concerned with declining productivity. Despite the fact that she regularly monitors her clerical staff four times each day—at 9:00 am, 11:00 am, 1:00 pm, and again at 3:00 pm—office productivity has declined 30 percent since she assumed the helm one year ago. Would you
21. Japanese officials are considering a new tariff on imported pork products from the United States in an attempt to reduce Japan’s reliance on U.S. pork. Due to political pressure, the U.S. International Trade Representative’s (ITR) office is also considering a new tariff on imported steel
20. Both Google and Amazon are major players in the smart home market, using their own internally developed smart home control system (Google Assistant and Alexa, respectively).Suppose each is considering a new round of investments into their smart home offerings, which could build on their
19. You are the manager of GearNet and must decide how many Internet hubs to produce to maximize your firm’s profit. GearNet and its only rival (NetWorks) sell dual-speed Internet hubs that are identical from consumers’ perspectives. The market price for hubs depends on the total quantity
18. You are a pricing manager at Argyle Inc.—a medium-sized firm that recently introduced a new product into the market. Argyle’s only competitor is Baker Company, which is significantly smaller than Argyle. The management of Argyle has decided to pursue a short-term strategy of maximizing this
17. At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg’s was quoted as saying, “ . . . for the past several years, our individual company growth has come out of the other fellow’s hide.” Kellogg’s has been producing cereal since 1906
16. You are the manager of a firm that manufactures front and rear windshields for the automobile industry. Due to economies of scale in the industry, entry by new firms is not profitable. Toyota has asked your company and your only rival to simultaneously submit a price quote for supplying 100,000

Showing 1 - 100 of 2090

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Last

Managerial Economics And Business Strategy 10th International Edition Michael Baye, Jeff Prince - Solutions

Step by Step Answers