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1. Suppose as a manager of a profitable department store you are confronted with a pricing problem. You have two types of customers: a high-end type that are willing to pay a price of $25 for a pair of Levis Jeans, and a low-end type customer that are willing to pay a price of $15 for the same pair of jeans. Your marginal costs are $13 per jeans. Your survey of your customers for jeans tells you that 60% of your customers are of the high end type and 40% are of the low end type. (a) If you decided to price high, what would be your expected profits per unit. (b) If you decided to price low, what would be your expected profits per unit. (c) Which pricing will you choose, based on the expected pricing per unit. 2. (a) Suppose a “lemons” car is valued at $2500 and a good car is valued at $5000. If you know that there is a 50% chance of getting each, what is the expected value of the car? (b) What will happen in the market if the price is based on the expected value? Explain. 3. Suppose you have hired a new worker, unfortunately you do not know if the worker is a shirker or a hard worker. Suppose working hard raises the probability of making a sale from 40% to 80% (thus raises the probability of making a commission C by the same percentage). If the cost of working harder is $200, what commission C should you offer the worker to provide an incentive to work hard.
Suppose you read in the newspaper that all last week the Fed conducted purchases in open market, and that on Tuesday of last week it lowered the discount rate.
Illustrate what mistakes did policymakers make that have kept developing nations from growing more quickly.
Describe and discuss your price elasticities for such products and discuss the movement of your demand for such a good when the price of that good rises. Share with your classmates whether your demand for the selected good is elastic, unit elastic, o..
hould the measure of imports used in the GNP accounts therefore be defined to include only imports of FINAL goods and services from abroad. What about export.
The affordable care act (Obama Care) has specific guidelines. Does the law of the affordable care act require all insurance companies to mimick all 10 titles and all sections? If so, is there a specific time line when all insurance companies will all..
Describe how each of these activities affects government, households, and businesses. Describe the flow of resources from one entity to another for each activity.
A specific McDonald’s franchise owner is looking at elasticities of Big Macs. E(p)= 2 (Price), E(i)=1 (Income), E(mt)=1.5 (m=Big Mac, t= Taco). The franchise owner would like to increase the price of Big Macs by 6%. If the franchise owner currently s..
Illustrate what ranges of the money growth rate (assuming positive values) would allow the Bank of Korea to achieve this objective.
Define Indifference Curve and what are the main properties of Indifference Curve? By using Indifference Curve analysis explain how the consumer attains maximum level of satisfaction?
How does this change the value generated by the market? Why do you say this? Where does this appear in your graph.
Explain how the price-specie-flow mechanism operates to maintain balanced trade between countries. What are the assumptions that are critical to the mechanism's successful operation?
Suppose the one-year interest rate on Swiss France is 10% and the US Dollar interest rate is 12% and the current $/SF spot rate is 0.8. What do you expect the 12-month forward rate by using the interest rate parity? Suppose the actual 12-month forwar..
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