Economics

ECON 525—Managerial Economics Name:

Exam 1

Summer, 2014

Download this exam to your desktop and save as ECON525Exam1You Last Name. Answer all questions and label all graphs completely. Put in as much space as you need. To maximize credit show all work. Submit your exam in a Word file through the Blackboard assignment.

This exam is expected to be completed under the highest standards of academic integrity. Do not discuss any aspect of this exam with anyone but Dr. Stockly. Any evidence of cheating will result in an “F” for the exam.

Note: Try to complete all graphs electronically. Don’t hesitate to look through lecture slides and assignments for graphs that show what you need, copy and paste them and then put in any modifications. If you need to draw a graph it is best to use PowerPoint and then paste into Word. You may also use the drawing tools in Word directly. If you are not able to draw the graphs correctly to include in your Word version of the exam, draw them by hand and turn them in to me in person or scan them into a file to submit with the test or fax them to me. If you fax any sections of your exam, be sure to include a cover sheet stating ATTN: Dr. Stockly. The fax number is 575-562-2252. Do not hesitate to contact me if you have any questions about your exam.

Chapter 1

Problem 1. You are the manager of a Fortune 500 hotel chain and must decide where to locate a new hotel. Based on tax considerations, your accounting department suggests that Atlantic City is the best choice, followed closely by Las Vegas. In particular, your current year tax savings from locating in Atlantic City are $4 million, but they are only $3 million in Las Vegas. Your marketing department, on the other hand, has provided you with sales estimates that suggest that the present value of the gross (of taxes) operating profits from locating in Atlantic City are only $10 million, but they are $14 million for Las Vegas. It will cost $14 million to build the hotel in...