Economics of Enterprise Answers

Suppose you decide to produce maheu and you discover it has a demand function given by

Consider the following problem: After your 8 hours a day of sleep, you have 16 hours aday to divide between leisure and study. Let leisure hours be the X variable and studyhours be the Y variable. Plot the straight-line relationship between all combinations of X and Y on a blank piece of graph paper. Be careful to label the axes and mark the origin

The Creative Publishing Company (CPC) is a coupon book publisher with markets in several
southeastern states. CPC coupon books are either sold directly to the public, sold through
religious and other charitable organizations, or given away as promotional items. Operating
experience during the past year suggests the following demand function for CPC’s coupon
books:
Q = 5,000 – 4,000P + 0.02Pop + 0.5I + 1.5A
Where: Q is quantity, P is price ($), Pop is population, I is disposable income per household ($),
and A is advertising expenditures ($).
A. Determine the demand faced by CPC in a typical market in which P = $10, Pop = 1,000,000
persons, I = $30,000, and A = $10,000.
B. Calculate the level of demand if CPC increases annual advertising expenditures from
$10,000 to $15,000.
C. Calculate the demand curves faced by CPC in parts A and B.

The Eastern Shuttle, Inc., is a regional airline providing shuttle service between New York and
Washington, DC. An analysis of the monthly demand for service has revealed the following
demand relation:
Q = 26,000 – 500P – 250POG + 200IB – 5,000S
Where: Q is quantity measured by the number of passengers per month, P is price ($), POG is
a regional price index for other consumer goods (1967 = 1.00), IB is an index of business activity,
and S, a binary or dummy variable, equals 1 in summer months and 0 otherwise.
A. Determine the demand curve facing the airline during the winter month of January if POG
= 4 and IB = 250.
B. Determine the demand curve facing the airline, quantity demanded, and total revenues
during the summer month of July if P = $100 and all other price-related and business
activity variables are as specified previously.

Kitty Russell’s Longbranch Cafe in Sausalito recently reduced Nachos Supreme appetizer prices
from $5 to $3 for afternoon “early bird” customers and enjoyed a resulting increase in sales
from 60 to 180 orders per day. Beverage sales also increased from 30 to 150 units per day.
A. Calculate the arc price elasticity of demand for Nachos Supreme appetizers.
B. Calculate the arc cross-price elasticity of demand between beverage sales and appetizer
prices.
C. Holding all else equal, would you expect an additional appetizer price decrease to $2.50
to cause both appetizer and beverage revenues to rise? Explain
Hint: For Arc use average price (P1+ P2/2) and quantity as average quantity (Q1+Q2/2).

NEXT is contemplating a T-shirt advertising promotion. Monthly sales data from T-shirt shops
marketing the “Eye Watch NEXT” design indicate that
Q = 1,500 – 200P
Where: Q is T-shirt sales and P is price.
A. How many T-shirts could NEXT sell at $4.50 each?
B. What price would NEXT have to charge to sell 900 T-shirts?
C. At what price would T-shirt sales equal zero?
D. Calculate the point price elasticity of demand at a price of $5?

Discuss different forms of collusion, while giving special attention to cartel.
2. Elaborate important factors affecting the likelihood of successful collusions. Do you think OPEC
has been successful? Justify your answer.
3. Based on the above article, if you are the chairman of OPEC, what would you do in respond to
Igor Sechin’s decision?

How would the estimated results have differed if the authors had not divided each country's prices, per capita income, and per capita pharmaceutical consumption by that of the united states?

The marginal product becomes negative in the short run. At least one variable remains constant e.g. Capital. How can we prove this through the Cobb Douglas function?

The Public Service Company of the Southwest is regulated by an elected state utility commission.
The firm has total assets of $500,000. The demand function for its services has been estimated as :
P = $250 - $0:15Q
The firm faces the following total cost function:
TC = $25,000 + $10Q
(The total cost function does not include the firm’s cost of capital)
a. In an unregulated environment, what price would this firm charge, what output would be
produced, what would total profits be, and what rate of return would the firm earn on its asset
base?