Answer to Odd Problems

15769 Words64 Pages
BMAns.qxd 9/26/11 11:18 AM Page 1 Answers to Odd-Numbered Problems Chapter 1 1. Managerial economics is the analysis of important management decisions using the tools of economics. Most business decisions are motivated by the goal of maximizing the firm’s profit. The tools of managerial economics provide a guide to profit-maximizing decisions. 3. The six steps might lead the soft-drink firm to consider the following questions. Step 1: What is the context? Is this the firm’s first such soft drink? Will it be first to the marketplace, or is it imitating a competitor? Step 2: What is the profit potential for such a drink? Would the drink achieve other objectives? Is the fruit drink complementary to the firm’s other products? Would it enhance the firm’s image? Step 3: Which of six versions of the drink should the firm introduce? When (now or later) and where (regionally, nationally, or internationally) should it introduce the drink? What is an appropriate advertising and promotion policy? Step 4: What are the firm’s profit forecasts for the drink in its first, second, and third years? What are the chances that the drink will be a failure after 15 months? Should the firm test-market the drink before launching it? Step 5: Based on the answers to the questions in Steps 1 through 4, what is the firm’s most profitable course of action? Step 6: In 1 BMAns.qxd 2 9/26/11 11:18 AM Page 2 Answers to Odd-Numbered Problems light of expected (or unexpected) developments in the first year of the launch, how should the firm modify its course of action? Chapter 2 1. This statement confuses the use of average values and marginal values. The proper statement is that output should be expanded as long as marginal revenue exceeds marginal cost. Clearly, average revenue is not the same as marginal revenue, nor is average cost

More about Answer to Odd Problems

Open Document