Solution Manual For Economics For Managers
Besanko & Braeutigam – Microeconomics, 3rd edition Solutions Manual Chapter 1 Analyzing Economic Problems Solutions to Review Questions 1. Microeconomics studies the economic behavior of individual economic decision makers, such as a consumer, a worker, a firm, or a manager. Macroeconomics studies how an entire national economy performs, examining such topics as the aggregate levels of income and employment, the levels of interest rates and prices, the rate of inflation, and the nature of business cycles. While our wants for goods and services are unlimited, the resources necessary to produce those goods and services, such as labor, managerial talent, capital, and raw materials, are “scarce” because their supply is limited. This scarcity implies that we are constrained in the choices we can make about which goods and services to produce. Thus, economics is often described as the science of constrained choice. Constrained optimization allows the decision maker to select the best (optimal) alternative while accounting for any possible limitations or restrictions on the choices.
The objective function represents the relationship to be maximized or minimized. For example, a firm’s profit might be the objective function and all choices will be evaluated in the profit function to determine which yields the highest profit. The constraints place limitations on the choice the decision maker can select and defines the set of alternatives from which the best will be chosen. If the price in the market was above the equilibrium price, consumers would be willing to purchase fewer units than suppliers would be willing to sell, creating an excess supply. As suppliers realize they are not selling the units they have made available, sellers will bid down the price to entice more consumers to purchase their goods or services. By definition, equilibrium is a state that will remain unchanged as long as exogenous factors remain unchanged.
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Since in this case suppliers will lower their price, this high price cannot be an equilibrium. When the price is below the equilibrium price, consumers will demand more units than suppliers have made available. This excess demand will entice consumers to bid up the prices to purchase the limited units available. Since the price will change, it cannot be an equilibrium. Exogenous variables are taken as given in an economic model, i.e., they are determined by some process outside the model, while endogenous variables are determined within the economic model being studied. Copyright © John Wiley & Sons, Inc. Chapter 1 - 1 Besanko & Braeutigam – Microeconomics, 3rd edition Solutions Manual An economic model that contained no endogenous variables would not be very interesting.
With no endogenous variables, nothing would be determined by the model so it would not serve much purpose. Comparative statics analyses are performed to determine how the levels of endogenous variables change as some exogenous variable is changed. This type of analysis is very important since in the real world the exogenous variables, such as weather, policy tools, etc. Are always changing and it is useful to know how changes in these variables affect the levels of other, endogenous, variables. An example of comparative statics analysis would be asking the question: If extraordinarily low rainfall (an exogenous variable) causes a 30 percent reduction in corn supply, by how much will the market price for corn (an endogenous variable) increase? Positive analysis attempts to explain how an economic system works or to predict how it will change over time by asking explanatory or predictive questions. Normative analysis focuses on what should be done by asking prescriptive questions.
A) Because this question asks whether dealership profits will go up or down (and by how much) – but refrains from inquiring as to whether this would be a good thing – it is an example of positive analysis. B) On the other hand, this question asks whether it is desirable to impose taxes on Internet sales, so it is normative analysis. Notably, this question does not ask what the effect of such taxes would be. Copyright © John Wiley & Sons, Inc. Chapter 1 - 2 Besanko & Braeutigam – Microeconomics, 3rd edition b) Solutions Manual Dry weather would reduce the supply of corn, to S 2 rather than S 1. S2 P S1 P2 P1 D Q 1.3 1.4 c) Assuming the U.S. Does not import corn, reduced production outside the U.S.
Would not impact U.S. Corn market supply. El Nino would, however, cause demand for U.S. Corn to shift out, the figure being the same as in part (a) above.
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A) The production manager wants to minimize total costs TC = P E.E + P L.L. B) The constraint is to produce Q = 200 units, so the manager must choose E and L so that EL = 200. C) The endogenous variables are E and L, because those are the variables over which the production manager has control.
By contrast, the exogenous variables are Q, P E, and P L because the production manager has no control over their values and must take them as given. In 2003, the initial equilibrium is at price P 1 and quantity Q 1. 1993 honda cbr 600 f2 manual. As national income increased, demand for aluminum shifted to the right, as depicted in the graph below by the shift from D 1 to D 2. The fall in the price of electricity shifted the supply curve to the right, from S 1 to S 2. Both shifts have the effect of increasing the equilibrium quantity, from Q 1 to Q 2. However, it is unclear whether price will rise or fall – if the demand shift dominates, price would rise; if the supply shift dominates, price would fall.
Copyright © John Wiley & Sons, Inc. Chapter 1 - 4 Besanko & Braeutigam – Microeconomics, 3rd edition 1.5 Solutions Manual When the price of gasoline abroad goes up, the supply on the domestic market decreases. Firms are willing to supply less gasoline for the same price as before. At that price the domestic demand exceeds the supply and therefore the equilibrium price in the US has to increase. When this is followed by increase in the demand – consumers are willing to buy more gasoline then before – supply would again be smaller than the demand.
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Hence the equilibrium price of the gasoline would increase even more. 1.6 P 200 250 300 350 400 Qd 500 450 400 350 300 Qs 300 350 400 450 500 1.7 P 80 90 100 110 120 d Q 680 640 600 560 520 Qs 580 640 700 760 820 1.8 When the demand increases, more people are willing to buy sunglasses at the equilibrium price. Hence, the supply is insufficient to satisfy the demand and the equilibrium price has to go up. The table below confirms this. P 80 90 100 110 120 d Q 8.
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