Solution Manual For Managerial Economics, 9th Edition by William F. Samuelson, Stephen G. Marks, Jay L. Zagorsky

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Managerial Economics, 9th Edition William F. Samuelson, Stephen G. Marks, Jay L.
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Zagorsky
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Answers to ww




Back-of-
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Chapter
Problems

Chapter 1 ww




1. Managerial economics is the analysis of important management decisions using
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the tools of economics. Most business decisions are motivated by the goal of
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maximizing the firm‟s profit. The tools of managerial economics provide a
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guide to profit- maximizing decisions.
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2. i) Multinational Production and Pricing. The global automobile company needs
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information on 1) demand (how many vehicles can be sold in each market at
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different prices), 2) plant capacities and production costs, and 3) trade barriers
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ww and tariffs.ww




ii) Market Entry. Remember that Uber began as a ridesharing idea, before
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wwultimately becoming a market disruptor with respect to the long established
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wwtaxicab industry. Crucial necessary information and questions include: Would city
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regulators allow Uber to operate at all? What market niche (how much demand)
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wwcould it carve out of the taxi and car service markets? At what prices relative to
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wwtaxis? Would customers trust a rideshare service? How many drivers could
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wwrideshare firms attract and at what costs?
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iii) Building a New Bridge. The authority should estimate usage of the bridge
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ww over its useful life, the likely cost of building and maintaining the bridge, and
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ww other important side-effects, pro and con -- including positive effects on
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ww business activity and the impacts on air pollution and traffic congestion.
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iv) A Regulatory Problem. Before deciding whether to promote the oil-to-coal
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conversion, government regulators need information on how much oil would be
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saved (and the dollar value of savings) and the cost of the chain of side-effects -
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- not only the direct cost of electricity provision but also pollution costs and
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, environmental damage.
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, v) Boeing and the 737 Max. Boeing gathered extensive information on potential
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airline demand for a new more fuel-efficient aircraft, yet considerable uncertainty
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remained with respect to future orders. Would the new aircraft shift significant
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orders and sales from Airbus, Boeing‟s longtime rival? Could Boeing achieve its
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aggressive R&D and production plan on budget and on schedule? Could it
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address and solve myriad reliability and safety problems, big and small? How
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severe would be ongoing regulatory oversight and how high a bar would the FAA
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set for certification requirements? Five or ten years from now, would the world
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economy continue to grow, fueling strong demand for air travel and for the new
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and improved aircraft?
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vi) An R&D Decision. The pharmaceutical company should quiz its scientists on
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the chances of success (and the timetable for completion) for each R&D
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approach. The company's marketing department would supply estimates of
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possible revenues from the drug; its production department would estimate
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possible costs.
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vii) David Letterman. Dave must carefully assess what he wants from a new
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contract (in particular how much he values the earlier time slot). As the
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ww negotiations unfold, Dave will glean valuable information as to the current
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ww competing offers of CBS and NBC. Of course, Dave must also try to assess how
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ww far the two networks might be willing to go in sweetening their offers.
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3. The six steps might lead the soft-drink firm to consider the following questions.
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Step 1: What is the context? Is this the firm‟s first such soft drink? Will it be
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first to the marketplace, or is it imitating a competitor? Step 2: What is the profit
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potential for such a drink? Would the drink achieve other objectives? Is the fruit
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drink complementary to the firm‟s other products? Would it enhance the firm‟s
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image? Step 3: Which of six versions of the drink should the firm introduce?
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When (now or later) and where (regionally, nationally, or internationally) should
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it introduce the drink? What is an appropriate advertising and promotion policy?
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Step 4: What are the firm‟s profit forecasts for the drink in its first, second, and
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third years? What are the chances that the drink will be a failure after 15
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months? Should the firm test market the drink before launching it? Step 5: Based
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on the answers to the questions in Steps 1 through 4, what is the firm‟s most
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profitable course of action? Step 6: In light of expected (or unexpected)
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developments in the first year of the launch, how should the firm modify its
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course of action?
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,