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Econ 4140/5140 Managerial Economics Homework 7 Dr. Michael Nieswiadomy Due date: May 3, 2010 Show your work. 1) (20 points) In the transfer pricing graph below, how much output should the engine division (E) produce if the competitive market price for engines is $10? How much output should the engine division sell to the assembly division and how much output should the engine division sell to the outside market? Should the assembly division buy any engines from the outside market? If so, how many? Show your work on the graph. 2) (20 points) In the dominant firm price leader figure below, what price will be set by the dominant firm? What outputs will be produced by the dominant firm (QD) and the competitive firms (QS) respectively? You do not need to write any equations. Only show graphically. 3) (20 points) Airline Overbooking Problem. The ticket price for a flight from Dallas to Chicago is $400. A plane can hold 300 passengers. Federal law requires that any customer who is unable to board a plane because it is over sold is entitled to compensation of $250. The number of no shows has a mean 30 with a standard deviation of 7. To maximize expected revenues minus compensation costs, how many tickets should the airline sell for each flight? Assume that anyone who does not use a ticket receives a $400 refund. Look at the Probabilistic Inventory handout for details. We will cover this in class next week. 4) (20 points) Bartels and Jaymes are two individuals who one day discover a stream that flows wine cooler instead of water. Bartels and Jaymes decide to bottle the wine cooler and sell it. The marginal cost of bottling wine cooler and the fixed cost to bottle wine cooler are both zero. The market demand for bottled wine cooler is given as: P = 90 0.25Q where Q is the total quantity of bottled wine cooler produced and P is the market price of bottled wine cooler. a. Suppose that Bartels and Jaymes act as Cournot duopolists, what are the reaction functions for Bartels and for Jaymes? b. In the long run, what level of output will Bartels produce if Bartels and Jaymes act as Cournot duopolists? 5) (20 points) Use the data on the following 925 customers to build a Pivot Table. It should show the average amount spent on travel for the age groups (your 1st column) of 25-34, 3544, 45-54, 55-64 for Women (2nd column) and Men (3rd column). You should NOT print this data out. It is long. Just copy and paste it in Excel. 1 Observation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 Amount Spent on Travel 997 850 997 951 993 781 912 649 1265 680 800 613 993 1059 939 841 828 1004 983 837 924 852 963 1046 943 875 979 1022 527 649 1130 1133 692 1341 1132 803 786 451 1237 825 895 937 1096 741 816 663 Age 44 39 43 41 50 39 45 59 25 38 41 32 46 38 42 44 38 50 48 46 42 48 39 36 44 46 44 40 26 34 59 30 55 26 55 41 50 64 26 40 47 45 40 36 47 59 Gender M F M M F F F M M F F F F M F F F F F M M M M M F F M M F F F M M M F F M M M F M F M F M M 2 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 1141 646 1346 698 870 1002 850 1245 728 698 503 1084 1115 1073 623 1074 981 583 621 1346 1042 1262 579 883 541 937 968 887 1159 605 646 984 1050 1123 1213 965 1036 879 667 1282 1212 723 632 842 1188 811 731 1258 1128 887 34 58 26 57 47 49 48 34 36 32 60 52 53 50 58 37 44 26 59 25 51 28 59 50 27 45 50 46 33 28 56 39 50 55 28 45 52 46 55 62 60 56 59 41 33 46 37 26 56 43 M M M M M F M M F F M F F F M M M F M M F M M F F F F M M F M M F F M F F M M F F M M F M M F M F F 3 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 1074 925 1263 1206 596 1173 621 576 1384 544 1083 678 963 1233 688 822 804 952 967 538 1224 813 565 926 521 519 773 862 1130 715 922 811 461 576 620 1226 742 1167 1186 509 999 782 499 962 948 990 509 463 995 1068 55 52 27 32 60 33 60 61 64 63 33 33 45 28 55 51 39 45 46 62 59 36 59 45 62 26 53 50 59 36 49 39 63 64 59 25 49 58 60 63 41 49 28 50 42 47 61 26 48 38 F F M M M M M M F M M F M M M M F F F M F F M F M F M M F F M F M M M M M F F M M M F F M F M F F M 4 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 1167 1211 798 1162 745 853 679 518 1123 969 1039 638 1002 1021 510 1287 1212 944 569 614 601 602 1177 1249 766 694 650 1083 857 758 564 820 879 479 1055 976 602 943 1127 493 820 642 454 1116 939 1241 1295 1185 687 503 57 27 51 57 56 43 35 25 55 36 55 33 56 51 63 25 63 41 61 58 63 33 56 57 41 51 59 37 46 52 60 45 46 29 53 46 30 42 58 25 43 60 28 57 43 61 62 29 37 27 F M M F M F F F F M F F F F M M F M M M M F F F F M M M M M M F M F F F F M F F F M F F F F F M F F 5 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 1238 693 731 525 653 805 1060 544 1052 1253 998 1232 1050 911 1079 821 1201 846 1208 939 719 1047 981 1141 547 619 1166 911 1044 840 1294 1092 977 1246 638 659 786 629 586 1311 1324 1230 880 1303 588 1259 1154 1177 1218 898 60 35 51 60 35 47 39 64 37 59 40 27 39 47 52 49 32 47 61 48 54 55 41 34 62 35 32 46 56 50 64 56 53 63 38 54 51 28 59 27 64 26 48 25 31 61 35 56 31 50 F F M M F F M M M F M M M M F M M M F F M F M M M F M M F M F F F F F M M F M M F M M M F F M F M F 6 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 784 685 1075 576 1051 1303 666 1178 1209 684 699 1163 1070 1042 1028 1220 778 924 901 471 953 1181 1147 535 1226 777 575 1129 552 717 1241 1319 562 1239 1286 1094 700 938 648 962 919 816 964 980 530 1063 1342 913 871 754 36 35 49 32 47 25 58 63 31 37 40 33 38 55 38 27 39 42 47 64 44 32 56 64 60 39 26 31 29 59 28 26 62 63 64 35 38 46 54 47 45 49 42 51 64 36 63 46 47 56 F F F F F M M F M F F M M F M M F M M M F M F M F F F M F M M M M F F M F F M F M M M F M M F F F M 7 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 685 1078 766 884 660 829 584 839 1299 777 1315 1126 641 606 797 513 1201 823 596 1267 853 1105 800 779 1008 782 1031 886 939 1024 1036 1148 979 586 1136 562 1285 920 562 603 853 816 1048 1062 1203 1193 1088 593 661 869 53 59 52 40 62 45 62 43 26 57 63 55 33 32 50 64 29 42 62 29 48 53 37 41 52 43 45 47 44 51 40 28 49 60 58 29 28 44 26 60 49 44 35 39 33 62 55 31 55 44 M F M F M M M F M M F F F F M M M F M M M F F F F F M F M F M M F M F F M M F M M M M M M F F F M F 8 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 1123 1086 1205 692 914 856 1108 1286 972 1066 1173 988 1033 608 655 696 604 856 541 600 1348 896 864 660 1154 1058 1067 1001 589 1238 984 753 1152 1065 762 512 683 537 511 860 829 928 786 678 664 1011 868 888 723 852 34 35 27 36 44 42 38 27 39 38 33 40 35 58 59 33 29 51 59 55 27 43 41 59 31 37 52 51 59 61 47 33 57 32 37 58 34 29 64 42 43 47 38 33 33 38 44 44 37 46 M M M F M F M M M M M M M M M F F M M M M M F M M M F F M F F F F M F M F F M F F F F F F M F F F M 9 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436 437 438 439 440 441 442 443 444 445 446 1312 1138 975 1282 682 1145 1148 808 1259 667 492 641 650 1246 779 412 581 644 1010 1074 1020 718 495 848 1042 882 469 782 561 1081 1276 884 1024 937 1049 1150 1360 833 747 1084 576 1071 852 1271 955 1110 907 1249 539 592 63 33 41 63 33 36 57 47 27 34 25 58 32 63 40 25 63 33 35 50 54 57 64 43 41 48 25 35 26 55 26 43 39 46 37 55 25 45 52 36 32 56 42 64 52 57 45 31 28 34 F M M F F M F M M F F M F F F F M F M F F M M F M M F F F F M M M F M F M F M M F F M F F F F M F F 10 447 448 449 450 451 452 453 454 455 456 457 458 459 460 461 462 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478 479 480 481 482 483 484 485 486 487 488 489 490 491 492 493 494 495 496 792 1056 904 547 1191 647 923 1195 941 485 771 1276 1227 652 1040 1125 838 716 650 899 678 1021 958 1260 1158 1244 515 839 467 1168 788 1224 1269 1120 957 385 1120 973 821 675 869 918 1214 616 1299 1290 943 896 984 1004 50 36 44 29 30 57 46 59 46 62 39 27 58 56 42 55 41 51 60 46 60 50 49 63 62 58 25 45 27 58 41 57 64 55 39 25 59 46 49 55 50 45 62 30 25 27 49 48 42 55 M M F F M M F F M M F M F M M F F M M M M F F F F F F F F F F F F F M F F M M M M F F F M M F F M F 11 497 498 499 500 501 502 503 504 505 506 507 508 509 510 511 512 513 514 515 516 517 518 519 520 521 522 523 524 525 526 527 528 529 530 531 532 533 534 535 536 537 538 539 540 541 542 543 544 545 546 816 1065 956 1312 1231 731 1206 1117 1092 761 1233 721 983 1239 647 1181 1040 969 998 1099 991 482 1049 898 474 749 750 694 839 1111 988 627 1051 653 1164 540 1189 926 836 1363 827 616 1122 722 1026 957 1057 664 1249 587 45 38 47 26 31 54 32 32 56 39 56 34 44 29 28 56 37 49 55 56 54 60 51 45 31 36 50 52 45 34 38 58 50 56 58 29 58 44 44 25 47 33 31 51 52 48 37 58 59 57 F M F M M M M M F F F F M M F F M F F F F M F M F F M M M M M M F M F F F M F M F F M M F F M M F M 12 547 548 549 550 551 552 553 554 555 556 557 558 559 560 561 562 563 564 565 566 567 568 569 570 571 572 573 574 575 576 577 578 579 580 581 582 583 584 585 586 587 588 589 590 591 592 593 594 595 596 771 811 537 663 915 823 839 948 465 663 972 518 1349 1008 683 629 973 864 920 947 1045 1004 608 472 835 1010 1251 656 863 1270 1147 1163 499 1136 1189 1116 754 467 722 1234 1160 817 1337 1111 1079 610 787 653 530 1299 34 42 64 29 46 51 37 48 25 57 43 25 25 40 34 58 39 47 42 40 53 48 31 25 48 51 64 33 49 31 32 58 63 33 34 34 53 26 52 26 32 39 62 53 55 30 45 33 64 27 F F M F F M F F F M M F M M F M M M M M F F F F M F F F M M M F M M M M M F M M M F F F F F M F M M 13 597 598 599 600 601 602 603 604 605 606 607 608 609 610 611 612 613 614 615 616 617 618 619 620 621 622 623 624 625 626 627 628 629 630 631 632 633 634 635 636 637 638 639 640 641 642 643 644 645 646 617 613 767 1230 1070 1034 1004 645 1003 1199 1006 533 721 1135 1005 1055 965 646 1277 986 946 1339 995 657 1002 529 826 862 1216 868 514 1279 525 795 826 1265 585 663 1204 849 733 989 1282 1147 1061 1123 976 1007 672 768 28 32 52 62 53 51 41 56 50 32 36 64 37 58 45 38 45 28 28 37 40 25 41 56 39 63 46 47 61 39 30 28 26 37 48 61 32 57 63 48 36 49 27 54 37 31 48 38 54 43 F F M F F F M M F M M M F F F M F F M M M M M M M M M M F F F M F F M F F M F M F F M F M M F M M F 14 647 648 649 650 651 652 653 654 655 656 657 658 659 660 661 662 663 664 665 666 667 668 669 670 671 672 673 674 675 676 677 678 679 680 681 682 683 684 685 686 687 688 689 690 691 692 693 694 695 696 1102 1335 652 1226 890 804 543 1109 731 826 1250 642 1280 1247 676 1089 1282 1154 1168 792 656 1193 1111 989 691 759 643 873 843 1211 1109 1178 795 1168 980 1175 1011 781 646 505 781 1084 1175 716 649 841 1129 1301 800 786 34 28 34 59 43 43 26 41 53 49 27 59 27 25 32 33 25 37 30 42 36 33 33 48 31 38 57 44 46 31 34 28 43 59 48 58 50 44 34 25 51 40 59 38 56 41 55 62 38 53 M M F F M F F M M M M M M M F M M M M F F M M F F F M F M M M M F F F F F F F F M M F F M F F F F M 15 697 698 699 700 701 702 703 704 705 706 707 708 709 710 711 712 713 714 715 716 717 718 719 720 721 722 723 724 725 726 727 728 729 730 731 732 733 734 735 736 737 738 739 740 741 742 743 744 745 746 905 1124 1187 805 821 1134 1267 1226 618 1111 1225 935 591 917 727 847 689 1093 845 668 1153 1072 590 648 431 1053 825 1027 708 549 880 1054 518 559 640 1246 1112 730 975 462 835 746 479 743 978 716 894 820 747 983 50 35 30 35 51 36 63 59 32 55 60 50 30 42 53 45 36 54 40 56 33 56 61 59 64 55 42 51 53 29 46 37 63 63 61 29 34 40 44 26 48 39 25 49 43 35 44 48 53 52 M M M F M M F F F F F F F M M F F F F M M F M M M F F F M F M M M M M M M F M F M F F M M F M M M F 16 747 748 749 750 751 752 753 754 755 756 757 758 759 760 761 762 763 764 765 766 767 768 769 770 771 772 773 774 775 776 777 778 779 780 781 782 783 784 785 786 787 788 789 790 791 792 793 794 795 796 1255 1165 1252 1168 713 1221 1144 718 1027 925 858 734 612 871 874 825 1175 612 905 1310 854 1274 1095 681 907 706 995 775 680 750 1056 830 951 744 823 1121 959 586 672 973 931 1069 927 736 586 808 513 1257 761 1241 28 35 26 59 56 62 36 35 38 46 46 36 60 43 44 50 61 29 44 64 45 27 33 56 47 32 39 48 58 55 53 48 46 50 39 32 49 61 31 53 43 37 43 34 64 49 26 31 37 25 M M M F M F M F M F M F M M F M F F M F F M M M M F M M M M F M M M F M F M F F M M F F M M F M F M 17 797 798 799 800 801 802 803 804 805 806 807 808 809 810 811 812 813 814 815 816 817 818 819 820 821 822 823 824 825 826 827 828 829 830 831 832 833 834 835 836 837 838 839 840 841 842 843 844 845 846 828 743 1174 478 711 949 803 1253 787 1130 1164 1130 615 732 732 1263 677 1069 761 1122 995 1037 776 1268 591 848 924 847 1131 1279 649 620 717 1171 721 1043 951 971 1125 1132 712 1018 1191 673 1273 1256 728 807 1100 877 38 32 57 63 51 44 45 62 51 59 60 59 34 37 55 62 54 54 43 38 52 41 39 31 58 41 46 46 55 31 59 28 51 58 55 39 46 50 55 55 53 39 31 58 27 64 37 38 34 42 F F F M M M M F M F F F F F M F M F F M F M F M M F F M F M M F M F M M M F F F M M M M M F F F M M 18 847 848 849 850 851 852 853 854 855 856 857 858 859 860 861 862 863 864 865 866 867 868 869 870 871 872 873 874 875 876 877 878 879 880 881 882 883 884 885 886 887 888 889 890 891 892 893 894 895 896 1130 1302 1155 568 804 958 616 536 1314 592 1086 1091 965 1075 955 934 1333 941 846 1064 777 1214 1082 673 688 1242 739 1038 679 825 1226 528 609 1218 561 681 1218 1101 1129 601 1280 918 1275 944 1119 770 835 1074 1300 590 51 25 30 64 38 46 32 27 63 27 58 54 44 57 47 48 25 51 43 34 39 57 53 36 53 27 39 53 56 38 30 27 57 28 27 36 62 56 56 61 31 42 26 47 34 40 41 40 61 62 F M M M F F F F F F F F M F F F M F M M F F F F M M F F M F M F M M F F F F F M M F M F M F F M F M 19 897 898 899 900 901 902 903 904 905 906 907 908 909 910 911 912 913 914 915 916 917 918 919 920 921 922 923 924 925 548 726 760 1150 1353 731 906 1117 535 937 859 882 985 547 733 954 1110 1241 570 532 753 680 907 775 1111 697 857 883 1038 25 36 39 55 25 52 44 59 30 45 44 44 52 26 53 51 59 29 60 63 51 56 44 53 57 57 48 43 53 F F F F M M M F F M M M F F M F F M M M M M F M F M M F F 20 Transfer Pricing 60 50 Price 40 30 20 10 0 0 10 20 30 40 50 60 Quantity D MR MCA MCE 21 Dominant Firm Price Leader Model 75 70 65 60 55 50 45 e 40 ic r P 35 30 25 20 15 10 5 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 Quantity Demand MCdom MCfringe 22
