Managerial Economics Exam 1 (1-6) Answers: Detailed Solution Guide

This document provides the answers and solutions to a Managerial Economics Exam 1, covering a range of topics including supply and demand, elasticity, and marginal revenue. The exam questions include multiple-choice, fill-in-the-blank, and calculation-based problems. The solutions presented include detailed explanations, calculations, and interpretations of economic concepts. Specific questions address the impact of changes in supply and demand, the calculation of elasticities (including price and income elasticity), and the interpretation of these elasticities. The document also includes questions on the impact of advertising expenditure on demand and the calculation of derivatives. This resource is designed to help students understand and master key concepts in managerial economics, offering a comprehensive guide to exam preparation.

MANAGERIAL ECONOMICS EXAM 1(1-6) ANSWER PAGES
Name ___________________________________ Version __________
Circle the one best answer, fill in the blank(s), or work out completely. Show calculations, please.
1 a. Quantity must increase but market price may fall, stay the same or even increase.
b. Price must fall but market quantity may fall, stay the same or even increase.
c. Price must increase but market quantity may fall, stay the same or even increase.
d. Quantity must decrease but market price may fall, stay the same or even increase.
e. Both market quantity and market price must increase.
f. Market quantity must increase and market price must decrease.
2.
3. 3.2 60.0 111.0 118.0 130.0 150.0 (all close, but approximate)
4 a. demand has increased
b. demand has decreased
c. supply has increased
d. supply has decreased
e. quantity supplied has decreased
f. quantity demanded has decreased
g. quantity demanded has increased
h. quantity supplied has increased
5. Circle the correct formula for marginal revenue (MR)
6. 1 3 4.5 5 6 7.5
M
D2
D1
S1
S2
Price
K
J
Quantity
L

7 a. 2 percent and total expenditures on bread will rise.
b. 2 percent and total expenditures on bread will fall.
c. 20 percent and total expenditures on bread will rise.
d. 20 percent and total expenditures on bread will fall.
e. 20 percent and total expenditures on bread will be unchanged.
8 a. negative and therefore these goods are inferior goods.
b. negative and therefore these goods are complements.
c. positive and therefore these goods are substitutes.
d. positive and therefore these goods are normal goods.
9. 0.39 0.5 .89 1.0 1.75 2.83
10. 2.5% 8% 10% 15% 25% 40%
11. -3.67 -1.22 1.22 1.44 3.67 4.33
12a. decrease by 1000
b. decrease by 1250
c. increase by 1000
d. increase by 1250
13a. decrease by 750
b. decrease by 1500
c. decrease by 1750
d. increase by 750
e. increase by 1500
f. increase by 1750
14a. increases by 200
b. decreases by 200
c. increases by 450
d. decreases by 450
e. increases by 700
f. decreases by 700
15a. normal goods
b. substitute goods
c. inferior goods
d. complementary goods
16. 19401 28902 31027 35902 38902 40152

17. Work elasticity out in detail, give your calculations below. Next, write a one sentence comment
addressing the question asked.
The point elasticity of demand with respect to advertising expenditure is
The measure elasticity is less than 1. This implies demand Grapple tablet is not very sensitive with
respect to advertisement expenditure. That means demand is relatively inelastic.
18. Work elasticity out in detail, give your calculations below. Next, write a one sentence
comment addressing the question asked.
Income elasticity of Grapple tablets
Here again elasticity is less than 1. Hence, demand is relatively less sensitive with respect to change
in income.
19. Write your derivative in the space below:
20. Write your derivative in the space below:

Managerial Ex 1_1_6 Answers.doc December 21, 2016