MANAGERIAL ECONOMICS EXAM 1-8 QUESTIONS

1. The following two linear functions represent a market (thus one is a supply function, the other a demand function). Circle the answer closest to being correct. Approximately what will the equilibrium quantity be? Q = 100 - 4.6P and Q = 75 + 6.2P

2. There has been a change in the market (represented in 1 above). The change is represented by the following two equations. Circle the one correct conclusion that describes the market change.

Q = 120 - 4.6P and Q = 75 + 6.2P

3. Circle the function on the answer sheet that represents the marginal revenue (MR) function for this demand function: Q = 120 - 4.6P

4. Circle the quantity that maximizes total revenue (TR) for the marginal revenue (MR) function selected in number three (3).

5. If supply increases and demand also decreases, we can conclude that the new equilibrium:

The multivariate demand function (below) is needed for questions 6 - 12.

Setting: U.S. Auto manufacturers are trying to develop a multivariate function with which to estimate the demand for their gas-electric hybrid compact cars. Here is one that Motors General developed for its Jolt:

Qj = 65000 - 20Pj + 20Pf + 35Pt - 5Pb + 0.2Tc + 0.05Y + 10Mg + 0.04A

Where

Qj = the number of Jolts demanded per week.

Pj = the price of each new Jolt (in $).

Pf = the price of each new Ford gas-electric hybrid (in $).

Pt = the price of each new Toyota gas-electric hybrid (in $).

Pb = the price of replacement batteries for the Jolt (in $).

Tc = the amount of tax credit incentive offered with the purchase of a new hybrid (in $).

Y = average weekly disposable income of a typical Jolt purchaser (in $).

Mg = the miles per gallon of gas rating of the Jolt (in miles per gallon).

A = average weekly Jolt advertising expenditure (in $).

6. If all variables remain unchanged except that the price of Ford's hybrid (Pf) decreases by $500, then the demand for Jolts will:

7. Economic conditions are recessive. Average weekly disposable income (Y) has decreased by $350. Thus demand for Jolts will:

8. If the sign of average weekly disposable income (Y) were negative (-), this would indicate that Jolts are considered:

9. The partial derivative of the demand for Jolts with respect to the price of Ford (Pf) hybrids is:

10. Enter the following values into your Jolt demand function (be very careful with the calculation because the resulting quantity of Jolts demanded will be used in several questions to follow).

Circle your answer on the answer sheet. Pj = $30000 Pf = $40000 Pt = $40000 Pb = $12000

Tc = $12000 Y = $900 Mg = 45 A = $15000

11. What is the point price elasticity of demand of Jolts with respect to the price (Pj) of $30000? Work out completely, also show the sign (+ or -), carry out to three decimal places.

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