Managerial Economics - Ch. 1 & Ch. 2

Harley Adler

January 28, 2015

Managerial Economics

Assignment #1 – CH. 1 & Ch. 2

CH. 1 – 2, 3, 6

2. Expenses are deductible if there is income associated with it. When the doctor is trying to deduct income as an expense there is no income with it, you cannot deduct lost income.

When a person volunteers time, which is lost income, for a charity, it cannot be deducted. However ant incurred expenses (ex. travel cost) related to that work can be deductible. Other out-of-pocket costs incurred can be deducted on behalf of the voluntary work.

3. a. explicit cost: 18,000 dollars and implicit cost: 20,000 dollars

b. opportunity cost: 15,000 dollars

c. My advice would be work for the completing firm and rent out his own truck, his opportunity cost is 13,000 dollars more per month.

6. a. If rent is high than the demand buy low income families decreases. Supply will stay the same so price will eventually have to decrease.

b. Not all families will be able to get the housing because there is only so much supply that can be used.

c. Low income family’s gain and the people renting out the housing will lose.

d. Rent controls are destructive because it shifts equilibrium than has to shift.

e. Instead of putting a ceiling on let the families do things in the houses/apartments to fix them up and that could be a way of earning income.

CH. 3 – 1, 2, 5, 7, 11

1. a. It would lead to an increase in the demand of French wines and a decrease in the demand of California wines. This means California wine would have to decrease in price.

b. Competition would increase, so prices would decrease to compete in the market.

c. Income of the people will increase so the demand for wine would increase. This will cause a increase in the price of wine.

d. The price of a bottle of wine will remain unchanged.

e. it will lead to an increase in the cost of production of wine so the price of a wine will increase.

f. Production cost of producing wine will decrease so the price of...