MANAGERIAL ECONOMICS ECO3105

Assignment 1 (20%)

Question 1

During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on
labor expense, raw materials, rent, and utilities. The firm's owner has provided
$750,000 of her own money instead of investing the money and earning a 10% annual
rate of return.

a. The explicit opportunity costs of using market-supplied resources are

______________. The implicit opportunity costs of using owner-supplied resources are
______________. Total economic cost is ______________.
b. The firm earns economic profit of ______________.
c. The firm's accounting profit is ______________.
d. If the owner could earn 15% annually on the money she has invested in the firm, the
economic profit of the firm would be ______________ (when revenue is $450,000).

Question 2

Suppose that the demand and supply functions for good X are

a. Equilibrium price is ___________ and equilibrium quantity is __________ units.

b. If price is $8, then a ______________ of _______ units occurs. If price is $12, then
a _____________ of _________ units occurs.
c. Let the demand function change to Qd = 80 - 6P. Given the ORIGINAL supply
function, the equilibrium price is ___________ and equilibrium quantity is __________
units.
d. Let the supply function change to Qs = -40 + 12P. Given the ORIGINAL demand
function, the equilibrium price is ___________ and equilibrium quantity is __________
units.
Question 3

Use the following graph showing the marginal benefit and marginal cost curves for
activity A to answer the following questions.

a. Net benefit is maximized when _________ units of A are chosen; marginal benefit is
__________ and marginal cost is _________.
b. If 300 units of A are chosen, net benefit will increase by __________ if one
_________ unit of A is used.
c. If 100 units of A are chosen, net benefit will increase by __________ if one
_________ unit of A is chosen.

Question 4

Thirty-two data points on Y and X are employed to estimate the parameters in the
linear relation Y = a + bX. The computer output from the regression analysis is

a. The equation of the sample regression line is: = _________________________.

b. There are ______ degrees of freedom for the t-test. At the 5% level of significance,
the critical t-value for the test is _____________.
c. At the 5% level of significance, __________ (is, not) significant, and ________
(is, is not) significant.
d. At the 2% level of significance, the critical t-value for a t-test is __________. At the
2% level of significance, _________ (is, is not) significant, and _________ (is, is
not) significant.
e. The p-value for indicates that the exact level of significance is ______ percent,
which is the probability of ________________________________________.
f. At the 5% level of significance, the critical value of the F-statistic is ______. The
model as a whole __________ (is, is not) significant at the 5% level.
g. If X equals 240, the fitted (or predicted) value of Y is
___________________________.
h. The percentage of the total variation in Y that is NOT explained by the regression is
_______.

Question 5

The marginal rate of substitution of X for Y is 3, the price of X is $4, and the price of Y
is $2.

a. The consumer is willing to give up ______ units of Y to obtain another X. The

consumer is willing to give up ______ units of X to obtain another Y.
b. The consumer must give up ______ units of Y to obtain another X. The consumer
must give up ______ units of X to obtain another Y. At what rate is the consumer able
to substitute X for Y in the market? _____.
c. Is the consumer making the utility maximizing choice? _____. If not, the consumer
should purchase more ______ and less _____.

Question 6

Puan Fateen Suraya adalah seorang pengurus bahagian perkhidmatan pelanggan di

Bank Utama Malaysia. Beliau dapat mengambil pekerja berkelulusan diploma dengan
bayaran gaji sebanyak RM20, ooo setahun atau mengambil pekerja berkelulusan Ijazah
Sarjana Muda dengan bayaran sebanyak RM30, 000 sebulan. Matlamat beliau sebagai
seorang pengurus adalah untuk memaksimumkan bilangaan pelanggan yang mendapat
khidmat dari bank dengan kekangan peruntukan kewaangan yang ada. Jadual 1
menunjukkan jumlah pelanggan yang mendapat khidmat bank berdasarkan bilangan
pekerja yang ada.
 Bilangan pelanggan yang mendapat khidmat bank
Bilangan pekerja Pekerja lulusan Diploma Pekerja lulusan Ijazah Sarjana
Muda
1 120 100
2 220 190
3 300 270
4 370 330
5 430 380
6 470 410

a. Kirakan Untung Marginal (Marginal Benefit) bagi pekerja lulusan Diploma.

b. Kirakan Untung Marginal (Marginal Benefit) bagi pekerja lulusan Ijazah Sarjana
Muda.
c. Jika peruntukan kewangan yang diberikan kepada bahagian perkhidmatan
pelanggan adalah RM160,000, bagaimanakah Puan Fateen dapat memaksimumkan
bilangan pelanggan yang mendapat khidmat dari bank?
d. Jika beliau mempunyai peruntukan kewangan sebanyak RM150,000 dan
mengambil mengambil 3 pekerja berkelulusan Diploma dan 3 pekerja berkelulusan
Ijazah Sarjana Muda, adakah keputusan yang dibuat oleh Puan Fateen ini satu
keputusan yang tepat? Kenapa?

Question 7

Suppose Y is related to R and S in the following nonlinear way:

a. In order to estimate the parameters a, b, and c, the equation must be

transformed into the form: __________________________________.

Twenty-six observations are used to obtain the following regression

results:
b. There are _______ degrees of freedom for the t-test. At the 1% level
of significance, the critical t-value for the test is _________.

c. At the 1% level of significance, _______ (is, is not) significant,

_______ (is, is not) significant, and ________ (is, is not) significant.

d. The estimated value of a is _____________.

e. The p-value for indicates that the exact level of significance is

_________percent, which is the probability of
_____________________________________________________.

f. At the 1% level of significance, the critical value of the F-statistic is

________. The model as a whole _________ (is, is not) significant at
the 1% level.

g. If R equals 12 and S equals 30, the fitted (or predicted) value of Y is

____________.

h. The percentage of the total variation in the dependent variable NOT

explained by the regression is ______________.

i. If R increases by 14%, Y will increase by ________ percent.

j. A 6.87% increase in Y will occur if S ________________ (increases,

decreases) by _______ percent.