ICA One Question

1
ICA OneQuestion 1

• The text lists seven reasons why firms are
  successful. List three of these reasons.

2
ICA OneQuestion 2

• Which strategy is most likely to improve the
  economic performance of a firm?
• a. Knowing your customer.
• b. Total quality management.
• c. A focus on the core competencies of
• the organization.
• d. None of the above will guarantee
• improvements in economic performance.

3
ICA OneQuestion 3

• What is the name of the simulation we are using
  in this course?

4
ICA OneQuestion 4

• Who is the author of the simulation for this
  course?
• David Berri
• Fernando Arellano
• Fernando Valenzuela
• Fernando Vargas

5
ICA OneQuestion 5

• How many team reports must each person author in
  this class?
• One b. Two
• c. Three d. Four

6
ICA OneExtra Credit

• If you are firm three, what is your username for
  the simulation?

7
ICA 2

• Hours needed to produce each good
• Nation Wine Cheese
• France 50 100
• U.S. 20 10
• U.S. has 200 units of labor.
• International terms of trade is 1 to 1.

8
ICA TwoQuestion 1

• Who has the absolute advantage in the production
  of wine? Who has the absolute advantage in the
  production of cheese?

9
ICA TwoQuestion 2

• In which good does France have a comparative
  advantage?

10
ICA TwoQuestion 3

• How many units of cheese does the U.S. have to
  give up to acquire a unit of wine without trade?

11
ICA TwoQuestion 4

• How much more wine can the U.S. acquire from
  trading vs. not trading?

12
ICA TwoQuestion 5

• After trade, which nation is better off and why?

13
ICA ThreeQuestion 1

• Which of the following would cause a change in
  quantity demand?
• An increase in price of the good.
• A decrease in income.
• An increase in the price of another good.
• A decrease in the size of the market.

14
ICA ThreeQuestion 2

• In class we discussed the history of the
  Marshallian Cross. Briefly outline this history.
  

15
ICA ThreeQuestion 3

• Explain briefly how the market system creates
  economic growth.

16
ICA ThreeQuestion 4

• TC 200 2Q 3Q2
• What is the equation for Marginal Cost?

17
ICA ThreeQuestion 5

• P 200 2Q
• What is the equation for Marginal Revenue?

18
ICA Four

• Given P 500 2Q
• TC 3200 20Q 2Q2
• What is the revenue maximizing level of output
  and price?
• What is the profit maximizing level of output and
  price?
• SHOW YOUR WORK!!!!!

19
ICA Five

• Unconstrained Optimization Problem

20
ICA Six

• Unconstrained Optimization Problem
• Constrained Optimization Problem

21
ICA Seven

• Why do we expect a competitive firm to earn
  normal profits in the long-run?
• Given NOPAT 40 million
• Capital 400 million
• 40 of capital financed via equity at 10. 60
  of capital financed via debt at 6. What is this
  firms EVA?

22
ICA Eight

• Given
• Qdx 100 -0.25Px 0.50Pz 0.002Y 0.05ADx
• Where Qdx Demand for good x
• Px Price of good x
• Pz Price of good z 50
• Y Income 25,000
• ADx Advertising of good x 400
• What is the equation for this firms inverse and
  traditional demand curve? Show your work.

23
ICA Eight

• 2. P 400 2Q P 100
• What is the own-price elasticity for this firm?
• If this firm increased its price, what would
  happen to profit? Explain.

24
ICA Nine

• P 400 0.25Q
• TC 1000 100Q 1.25Q2
• What is the profit maximizing price and quantity?
• What is the own-price elasticity when profit is
  maximized?
• What is the Lerner Index for this firm?
• If P 100, what would happen to profits if the
  firm increased its price? Explain your answer.
• MIDTERM WAS HERE!!!

25
ICA 10

• Given the following answer questions 1-3.
• P 800 4Q
• TC 900 300Q Q2
• Solve for the level of output that will maximize
  profits.
• Solve for the level of output that will minimize
  average cost.
• If the wage paid to workers was 5000, what is
  the marginal product of labor when the firm
  maximizes profits?
• Econometric analysis reveals that Ben Wallace
  produced 23.03 wins during the 2002-03 regular
  season. If each win generates 400,000 in
  revenue, what is Wallaces MRP?
• What is the Law of Diminishing Returns?

26
ICA 11

• Given the following answer questions 1-3.
• P 600 2Q
• TC 5000 200Q 2Q2
• Solve for the level of output that will maximize
  profits.
• Solve for the level of output that will minimize
  average cost.
• If the wage paid to workers was 2000, what is
  the marginal product of labor when the firm
  maximizes profits?
• Econometric analysis reveals that Shawn Marion
  produced 19.18 wins during the 2002-03 regular
  season. If each win generates 500,000 in
  revenue, what is Marions MRP?
• Marions salary was 2.265 million. Was Marion
  exploited?

27
ICA 12

• Given the following answer questions 1-5.
• P 6100 2Q
• TC 45000 100Q 2Q2
• Solve for the level of output that will maximize
  profits.
• Solve for the output that will minimize average
  total cost.
• What is the level of marginal cost when this firm
  produces at capacity?
• How much output will this firm produce if it
  employs a multi-plant operation?
• Determine the optimal number of plants for this
  firm.

28
ICA 13

• Given APL gt MPL
• What will happen to the average product of labor
  if the firm hired more workers. Briefly explain.
• List the steps Gerald Scully followed to
  determine if a professional athlete is exploited.
• If MRPL lt WL what action will a profit maximizing
  firm take? Explain.
• List the reasons why a firm will realize
  economies of scale.

29
ICA 14

• Given the following answer questions 1-4.
• P 204
• TC 100 4Q Q2
• What is the profit maximizing level of output for
  this firm?
• What is the profit maximizing level of profit for
  this firm?
• What will be the long-run level of output for
  this firm?
• What will be the long-run price for this firm?
• Identify two factors, noted in lecture, that
  determine the level of competition in an industry.

30
ICA 15

• Given the following answer questions 1-5.
• P 10,000 3.5Q
• TC 240,000 400Q 1.5Q2
• Solve for the level of output that will maximize
  this monopolists profits.
• What is the average cost minimizing level of
  production for this monopoly?
• Determine the optimal number of plants this firm
  would employ if it was employing a multi-plant
  production method.
• If this market were perfectly competitive, how
  much output would the market produce?
• EXTRA CREDIT
• How much consumer surplus is lost when this
  market moves from a perfectly competitive
  industry to a monopoly?

31
ICA 16

• 1. True or False Price equals average total cost
  in the long-run in monopolistic competition.
  Explain your answer.
• 2. True or False Price equals marginal cost in
  the long-run in monopolistic competition. Explain
  your answer.
• 3. True or False A monopolistically competitive
  firm will minimize average total cost in the long
  run. Explain your answer.
• 4. What would create a kink in a firms demand
  curve? What is the primary lesson the kinked
  demand curve model teaches?

32
ICA 17

• Question One
• For which of the following market structures do
  we not expect price to equal average total cost
  in the long-run?
• Monopoly
• Monopolistic Competition
• Perfect Competition
• For all of the above P ATC in the long-run.

33
ICA 17

• Question Two
• For which of the following market structures do
  we expect average total cost to be minimized in
  the long-run?
• Monopoly
• Monopolistic Competition
• Perfect Competition
• For all of the above ATC is minimized in the
  long-run.

34
ICA 17

• Question Three
• For which of the following market structures do
  we expect price to equal marginal cost?
• a. Monopoly
• b. Monopolistic Competition
• Perfect Competition
• For all of the above price equals marginal cost.

35
ICA 17

• Question Four
• P 10,000 Q
• TC 450,000 400Q 5Q2
• If this firm pursued a multi-plant production
  strategy, how many plants would the firm employ?
  Show your work.

36
ICA 17

• Question Five
• P 10,000 Q
• TC 450,000 400Q 5Q2
• Imagine the product this firm produces requires
  2 hours of skilled labor per unit, and the firm
  has1,000 hours of such labor available. What
  hourly wage would the firm pay for an extra unit
  of skilled labor? Explain.

37
ICA 17

• EXTRA CREDIT QUESTION
• In class the law of diminishing returns was
  defined
• a. as a variable input increases, holding all
  else constant, output will eventually diminish.
• b. as a variable input increases, holding all
  else constant, the rate of increase in output
  will eventually diminish.
• c. as a number of variable inputs are increased,
  holding all else constant, the rate of increase
  in output will eventually diminish.