1: 

The widespread success of chains such as Buffalo Wild Wings and Wingstop indicates consumer demand for Buffalo wings is substantial and growing. Buffalo wings, of course, have nothing to do with buffalos—they are fried chicken wings coated in various types of generally hot sauces.

How does the increase in demand for Buffalo wings affect the costs of a restaurant like Chick-fil-A, which does not sell them but sells sandwiches made from chicken breasts?

 

Question 2:

Tesoro Corporation operates six oil refineries. Each produces a variety of products. Among its other products, the refinery in Los Angeles produces more than 50 percent of the jet fuel used at the Los Angeles airport. Suppose that the price of jet fuel falls.

Identify and explain the reactions that the managers at Tesoro should have to the reduction in price.

 

Question 3:

In 2012, United Airlines expanded the size of the overhead bins for carry-on luggage to gain a competitive advantage over its rivals. This change increased the quality of the trip experience for fliers.

Explain the factors the managers of United Airlines considered in making this decision.

 

Question 4:

Successful advertising shifts the demand curve of a product.

What is the relationship between the shift in the demand curve and the marginal benefit from advertising?

 

Question 5:

Good Burger is a chain of franchised hamburger restaurants. The franchisees are required to contribute 4 percent of their revenue to the franchisor for advertising. Suppose that the franchisor uses half of the fund for advertising that boosts the demand for the chain's burgers and the other half for advertising intended to expand the number of franchisees nationwide.

 

a. If the demand-enhancing advertisements are successful, how do they affect a franchisee's price and quantity of hamburgers?

 

b. If the advertisements intended to increase the number of franchisees wind up substantially increasing the number of Good Burger locations, how do these advertisements affect an existing franchisee's price and quantity of hamburgers?