Assignment

1 Managerial Economics & Quantitative Analysis Marginal Analysis for Optimal Decisions and Basic Estimation Techniques Assignment Assignment Instructions: Please ensure that you show all work for any calculations, create any relevant graphs and show further regressions in Microsoft Excel. Due date: No later than Tuesday, August 23, 2011 at 9:00am (EST Toronto, Canada time zone) Question #1 Twentyfirst Century Electronics has discovered a theft problem at its warehouse and has decided to hire security guards. The firm wants to hire the optimal number of security guards. The following table shows how the number of security guards affects the number of radios stolen per week: Number of security guards 0 1 2 3 4 5 Number of radios stolen per week 50 30 20 14 8 6

a) If each security guard is paid $200 a week and the cost of a stolen radio is $25, how many security guards should the firm hire? b) If the cost of a stolen radio is $25, what is the most the firm would be willing to pay to hire the first security guard? c) If each security guard is paid $200 a week and the cost of a stolen radio is $50, how many security guards should the firm hire?

Question #2 Janice Waller, the manager of the customer service department at First Bank of Jefferson County, can hire employees with a high school diploma for $20,000 annually and employees with a bachelor’s degree for $30,000. She wants to maximize the number of customers served, given a fixed payroll. The following table shows how the total number of customers served varies with the number of employees: Number of employees 1 Total number of customers served: High school diploma Bachelor’s degree 120 100

2 2 3 4 5 6 220 300 370 430 470 190 270 330 380 410

a) If Ms. Waller has a payroll of $160,000, how should she allocate this budget in order to maximize the number of customers served? b) If she has a budget of $150,000 and currently hires three people with high school diplomas and three with bachelor’s degrees, is...