You are managing a large hat company. The marketing departme…
You are managing a large hat company. The marketing department submits a report to you about the demand for your company’s hats. In the report is the following estimated monthly demand function: Qd = 30,423 – 32.1 × P + 44.8 × INCOME + 61.2 × PALTERNATIVE + 180.5 × RAINFALL (889.2) (14.0) (13.9) (21.2) (161.1) In this regression, P is the price of your product, Income is average income in thousands of dollars, PALTERNATIVE is the price of another product, RAINFALL is the amount of rain in the month, and the numbers in parentheses below the coefficients are the standard errors of the estimated coefficients directly above them. The R2 statistic for the regression is 0.87. Is the product a normal good or an inferior good? Explain whether the alternative product is a complement or a substitute for your product. Are you (statistically) confident about your answer? Explain. These are the only data you have, so you cannot ask your analysts to include other variables. Aside from this, would you ask your analysts to make changes to the regression they gave you and re-estimate the equation? If so, what would you ask; if not, why not?
Read Details(Here is a question from the book.) Suppose that you own Lau…
(Here is a question from the book.) Suppose that you own Lauderdale Aerial Spraying, a large Texas crop-dusting company. Drones are able to spray crops at lower cost than manned planes. Currently, Federal Aviation Administration (FAA) regulations prohibit the use of drones for crop dusting or other precision agricultural use. If the FAA eliminates these regulations, what will happen to the price and quantity of crop spraying? In your answer, describe what happens to the demand and supply curves of crop spraying.
Read DetailsYou are a manager for a tech company that makes modules for…
You are a manager for a tech company that makes modules for drones. You use memory chips in your modules and have been buying them to store in inventory. To make the math easy, suppose you bought 1 chip two months ago and paid the then market price of $450 for the chip, bought another 1 chip one month ago and paid the then market price of $500 for the chip, and then purchased an additional 1 chip today and paid the market price of $550 for the chip. Of course, you can either sell the chips or use them in your module. What is the opportunity cost of using one of these chips today to make a module? Explain your answer.
Read Details(I told you I’d use a question from the practice exam file,…
(I told you I’d use a question from the practice exam file, so here it is.) Data centers use large amounts of electricity. As more data centers are constructed and come online, what is the effect of this on the price and quantity of electricity? In your answer, describe what happens to the demand and supply curves of electricity.
Read Details