Economics Answers

Risk _________ is the term used to describe when an organization bears its own risk and is willing to withstand the financial losses from any claims that arise?

Thadeus J. Wren and Joshua K. Skimpy have written a new managerial economics textbook: Managerial Economics: Decision Making for the Chronically Confused.The publisher, Nock, Downe & Owt (NDO), Inc., has offered Wren and Skimpy the following contract options: royalty payments amounting to 10% of total revenues 15% of total profits. NDO’s total revenue and total cost functions associated with publishing the textbook are given as
TR = 10,000Q- 5Q2
TC = 10,000 - 20Q+ 5Q2
If we assume that NDO is a profit maximizer, which contract should Wren and Skimpy choose?
b. Would your answer to part a have been different if NDO were a sales (total revenue) maximizer?

Suppose that initially the Turkish economy is in medium run equilibrium where Pe=P and Yn=Y. Consider the developments in the economy due to Covid19 epidemic. These will effect both the aggregate demand and supply. Investment and consumption are decreasing as well as the production of many sectors. Unfortunately, the supply side model we use in this class is very simple. However, you can consider this as a case of an increase in z in the wage setting equation.
Initially ignore the policy responses, i.e assume that there is no change in G and T as well as the Central Bank behavior.

a.Explain the effect of these developments on the good and money market. Specifically refer to the equations and explain how each equation will be effected.

b.Graphically show the impact of the same developments by using an IS-LM graph, and explain your graph.

Suppose that initially the Turkish economy is in medium run equilibrium where Pe=P and Yn=Y. Consider the developments in the economy due to Covid19 epidemic. These will effect both the aggregate demand and supply. Investment and consumption are decreasing as well as the production of many sectors. Unfortunately, the supply side model we use in this class is very simple. However, you can consider this as a case of an increase in z in the wage setting equation.
Initially ignore the policy responses, i.e assume that there is no change in G and T as well as the Central Bank behavior.
Q) Graphically show the impact of the these developments by using an AD-AS graph, and explain your graph. What is the impact of these developments on the unemployment level, and income?

Using appropriate tables and diagrams,distinguish clearly between demand, individual demand schedule and demand curve, and market demand schedule and market demand curve

With the aid of appropriate diagrams discuss the effects of changes in demand on a supply curve and explain the major factors that bring about such a change

Suppose a movie theater determines it can charge different prices to patrons who go to weekday matinees and people who attend evening and weekend shows . The movie theater’s goal is to increase total revenue.

The price elasticity of demand for weekend and evening patrons is -0.40, and the price elasticity of demand for matinee moviegoers is -2.50.

Based on the price elasticity of demand for each group of people, how should the movie theater adjust its prices?

Explain why employers pay a lower efficiency wage when unemployment is high. How would the efficiency wage change in an economy if it became easier to monitor the work that employees did? Other than to incentivise workers to put in effort, can you think of any other reasons why wages might be higher when unemployment is low (i.e. an upward-sloping wage-setting curve)?

Explain the type of pricing strategy that you as the manager of a
company would implement for Good X and Good Y with the following price elasticity of demand co efficients. Use diagrams to motivate your answer.


a). Good X: 2.3
(b). Good Y: 0.6

a) Suppose you walk into a large supermarket at 2am with a friend.Your friend says, "I can't believe that these stores stay open all night. Only one out of fifteen checkout lines is open. There can't be more than ten shoppers in this store. It just doesn't make any sense for this store to be open all night." What conditions must be true for it to be to the advantage of the supermarket to stay open all night? (13 marks)
b) Your friend has a large garden and grows fresh fruit and vegetables to be sold at a local "farmer's market." Last year your friend was the only worker in the garden, without any additional workers. However, this year your friend hired a worker and production more than doubled. He comments “Next summer, I think I'll hire another two workers (so total workers including myself would go up from 2 to 4) and my output should again more than double". Is it likely that he could hire more workers and always continue to reap greater than proportional increases in production? Why