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Exam 1 Problems

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1. Profit Maximization. Fill in the missing data for price (P), total revenue (TR), marginal revenue (MR), total cost (TC), marginal cost (MC), profit (p), and marginal profit (Mp) in the following table.
Q P TR MR TC MC p Mp
0 $50 $ 0 $ -- $ 10 $ -- $ -10 $ --
1 45 45 45 60 50 -15 -5
2 40   35 115   -35  
3     35 175 60   -35
4   120 15   65 -120 -50
5 25   5 310     -65
6 20   -5   75   -80
A. At what output (Q) level is profit maximized (or losses minimized)? Explain.
B. At what output (Q) level is revenue maximized?
2. Marginal Analysis: Tables. Bree Van De Camp is a regional sales representative for Snappy Tools, Inc., and sells hand tools to auto mechanics in New England states. Van De Camp's goal is to maximize total monthly commission income, which is figured at 6.25% of gross sales. In reviewing experience over the past year, Van De Camp found the following relations between days spent in each state and weekly sales generated.
Days Maine Sales New Hampshire Sales Vermont Sales
0 $ 4,000 $ 3,000 $1,900
1 10,000 7,000 5,200
2 15,000 10,600 7,400
3 19,000 13,800 8,600
4 22,000 16,600 9,200
5 24,000 19,000 9,600
6 25,000 21,000 9,800
A. Construct a table showing Van De Camp's marginal sales per day in each state.
B. If Van De Camp is limited to 6 selling days per week, how should they be spent?
C. Calculate Van De Camp's maximum weekly commission income.
3. Demand Analysis. The San Diego Zoo is contemplating a stuffed panda bear advertising promotion. Annualized sales data from local shops marketing the "Can't Bear it When You're Away" bear indicate that:
Q = 50,000 - 1,000P
where Q is Panda bear sales and P is price.
A. How many pandas could the zoo sell at $30 each?
B. What price would the zoo have to charge to sell 25,000 pandas?
C. At what price would panda sales equal zero?
D. How many bears could be given away?
E. Calculate the point price elasticity of demand at a price of $10.
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Exam 1 Problems. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/managerial-economics/exam1problems.htm. This work is licensed under a Creative Commons License Creative Commons License