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Managerial Economics Homework Exercises
Rigoberto

3.-
For each of the firms below, identify the market structure that best maches the
competitive characteristics found in that firm's market:
b) ........................................ Exon Corporation
c) ........................................ Dow Chemical, Wholesale chemicals
d) ......................................... Pfizer, Inc, supplier of viagra

4.- Explain why Sunkist, a well-known citrus producer, is a price-taker.
5.- Explain Why the Lexus dealer in your city is a Pice-setting firm. Be sure
to discuss the concept of market power.

6.- Consider the market for new, single-family homes in New Orleans.
The generalized demand funtion for new housing in New Orleans is
estimated to be
Qd = 15-2p + 0.05M + 0.10R
Where Qd is the monthly quantity demanded, p is the price per square
foot, M is average monthly income in New Orleans, and R is the average
monthly rent for a three-bedroom aprtment in New Orleans. Qd is measured
in units of 1,000 square feet per month.
a) New housing in New Orleans is a(n)..............................(normal, inferior)
good. How can you tell from the generalized demand funtion?.

b) New housing and three bedroom apartments are....................... (substitutes,
complements) in New Orleans. How can you tell from the generalized demand
funtion?

c) If a average monthly income is \$1,500 and the monthly rental rate for
the three-bedroom apartments is \$700, then the demand funtion for new housing
in New Orleans is: Qd =..................................................

d) Graph the demand curve for new housing in New Orleans on the axes
provided below. Label the demand curve D0.
The generalized supply funtion for new housing in New Orleans is estimated
to be: Qs =96 + 2P - 10PL - 4 Pk
Where P is the price per square foot of new housing in New Orleans, PL is the
average hourly wage rate for construction workers, and Pk is the price of Capital
( as measured by the average rate of interest paid on loans to home builders).
Qs is measured in units of 1,000 square feet per month.

e) Does it make sense for PL and Pk to have negative coefficients in the
generalized supply funtions? Explain why or why not.

f) If the average hourly wage rate for construction workers is \$10 per hour
and the average rate of interest on loans to builders is 9% ( i.e Pk = 9),
then the supply funtion for new housing is:
Qs =..................................................

g) Graph the supply curve for new housing in the graph below. Label Supply S0.

h) Solve mathematically for equilibrium price and quantity. Show your work.

PE = \$.....................................per square foot.
QE = ................................... Square feet per month ( in 1,000's).

i) Do your supply and demand curves intersect at PE and QE found in
question h) above? Should they?

j) Suppose New Orleans suffers a serious recession that causes average
monthly income to fall from \$1,500 to \$1,100 per month. If other things
remain the same, the demand for new housing in New Orleans is Now:
Qd =.......................................... Plot this new demand curve in the
figure below. Label it D'.

k) Suppose that because of the recession in New Orleans, the wage rate
for construction workers falls to \$8 per hour. If other things remain the same
the supply of new housing in New Orleans is Now:
Qs=...........................................Plot the new supply curve in the figure
Label the new supply curve S'.

l) After income falls to \$1,100 and wages fall to \$8, new equilibrium price
and quantity are: PE= \$..............................per square foot
QE =.............................square feet per month (in 1,000's).

#### Solution Preview

Hello,
<br>
<br>My answers are attached. Just remember the basic concepts of economics: ...

#### Solution Summary

The expert examines the supply and demand for managerial economics.

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