COMPLETE SOLUTION MANUAL FOR Managerial Economics and Business Strategy 10th Edition By Michael Baye, Jeff Prince All Chapters included LATEST UPDATE!!!

Solution Manual for Managerial Econ qy qy qy qy




omics and Business Strategy 10th Mich
qy qy qy qy qy




ael Baye, Jeff Prince qy qy qy




COMPLETE SOLUTION MANUAL FOR qy qy qy



Managerial Economics and Business Strategy 10th Edition
qy qy qy qy qy qy qy




By Michael Baye, Jeff Prince
qy qy qy qy




Chapter 1 qy




The Fundamentals of Managerial Economics Ans
qy qy qy qy qy




wers to Questions and Problems qy qy qy qy




1. This situation best represents producer-
qy qy qy qy


producer rivalry. Here, Southwest is a producer attempting to steal customers
qy q y qy qy qy qy qy qy qy qy qy


away from other producers in the form of lower prices.
qy qy qy qy qy qy qy qy qy




2. The maximum you would be willing to pay for this asset is the present val
qy qy qy qy qy qy qy qy qy qy qy qy qy qy


ue, which is
qy qy




3.
a. Net benefits are N(Q) = 20 + 24Q – 4Q2.
qy qy qy qy qy qy qy qy qy


b. Net benefits when Q = 1 are N(1) = 20 + 24 –
qy qy qy qy qy qy qy qy qy qy qy qy


4 = 40 and when Q = 5 they are N(5) = 20 + 24(5) – 4(5)2 = 40.
qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


c. Marginal net benefits are MNB(Q) = 24 – 8Q. qy qy qy qy qy qy qy qy


d. Marginal net benefits when Q 1 are MNB(1) = 24 – 8(1) = 16 and when Q
qy qy 5 qy qy q y qy qy qy qy qy qy qy qy qy qy qy


they are MNB(5) = 24 – 8(5) = -16.
qy qy qy qy qy qy qy qy


e. Setting MNB(Q) = 24 – qy qy qy qy


8Q = 0 and solving for Q, we see that net benefits are maximized when Q
qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


= 3. qy




Page 1qy

, f. When net benefits are maximized at Q = 3, marginal net benefits are zero. That
qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


is, MNB(3) = 24 – 8(3) = 0.
qy qy qy qy qy qy qy




4.
a. The value of the firm before it pays out current dividends is
qy qy qy qy qy qy qy qy qy qy qy




.

b. The value of the firm immediately after paying the dividend is
qy qy qy qy qy qy qy qy qy qy




Managerial Economics and Business Strategy, 10e
qy qy qy qy qy




Copyrightqy©qy2022qybyqyMcGraw-HillqyEducation.
Allqyrightsqyreserved.qyNoqyreproductionqyorqydistributionqywithoutqytheqypriorqywrittenqyconsentqyofqyMcGrawqyHillqyEducation.




.

5. The present value of the perpetual stream of cash flows. This is given by
qy qy qy qy qy qy qy qy qy qy qy qy qy




6. The completed table looks like this:
qy qy qy qy qy




Control Total Benef Net Be Marginal
qy qy Total qy Marginal Marginal qy
Net Ben
qy qy
Variable its B(Q) qy Cost
qy nefits N qy Benefit
qy Cost MC( qy
efit MNB
qy
Q
qy C(Q
qy (Q) MB(Q)
qy Q)
(Q)
)
100 1200 950 250 210 60 150
101 1400 1020 380 200 70 130
102 1590 1100 490 190 80 110
103 1770 1190 580 180 90 90
104 1940 1290 650 170 100 70
105 2100 1400 700 160 110 50
106 2250 1520 730 150 120 30
107 2390 1650 740 140 130 10
108 2520 1790 730 130 140 -10
109 2640 1940 700 120 150 -30
110 2750 2100 650 110 160 -50


Page 2
qy Michael R. Baye & Jeffrey T. Prin qy qy qy qy qy qy


ce

, a. Net benefits are maximized at Q = 107.
qy qy qy qy qy qy qy


b. Marginal cost is slightly smaller than marginal benefit (MC = 130 and MB = 14
qy qy qy qy qy qy qy qy qy qy qy qy qy qy


0). This is due to the discrete nature of the control variable.
qy qy qy qy qy qy qy qy qy qy qy




7.
a. The net present value of attending school is the present value of the benefits d
qy qy qy qy qy qy qy qy qy qy qy qy qy qy


erived from attending school (including the stream of higher earnings and the
qy qy qy qy qy qy qy qy qy qy qy qy


value to you of the work environment and prestige that your education provide
qy qy qy qy qy qy qy qy qy qy qy qy


s), minus the opportunity cost of attending school. As noted in the text, the op
qy qy qy qy qy qy qy qy qy qy qy qy qy qy


portunity cost of attending school is generally greater than the cost of books an
qy qy qy qy qy qy qy qy qy qy qy qy qy


d tuition. It is rational for an individual to enroll in graduate school when his or
qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


her net present value is greater than zero.
qy qy qy qy qy qy qy qy


b. Since this decreases the opportunity cost of getting an M.B.A., one would expe
qy qy qy qy qy qy qy qy qy qy qy qy


ct more students to apply for admission into M.B.A. Programs.
qy qy qy qy qy qy qy qy qy




8.
a. Her accounting profits are $170,000. These are computed as the differen
qy qy qy qy qy qy qy qy qy qy


ce between revenues ($200,000) and explicit costs ($30,000).
qy qy qy qy qy qy qy


b. By working as a painter, Jaynet gives up the $110,000 she could have earned
qy qy qy qy qy qy qy qy qy qy qy qy qy qy


under her next best alternative. This implicit cost of $110,000 is in addition to t
qy qy qy qy qy qy qy qy qy qy qy qy qy qy


he
$30,000 in explicit costs. Since her economic costs are $140,000, her economic
qy qy qy qy qy qy qy qy qy qy qy qy


profits are $200,000 - $140,000 = $60,000.
qy qy qy qy qy qy


9.
a. Total benefit when Q = 2 is B(2) = 20(2) –
qy qy qy qy qy qy qy qy qy qy


2*22 = 32. When Q = 10, B(10) = 20(10) – 2*102 = 0.
qy qy qy qy qy qy qy qy qy qy qy qy qy qy



b. Marginal benefit when Q = 2 is MB(2) = 20 – qy qy qy qy qy qy qy qy qy qy


4(2) = 12. When Q = 10, it is MB(10) = 20 – 4(10) = -20.
qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


c. The level of Q that maximizes total benefits satisfies MB(Q) = 20 – 4Q = 0, so Q
qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


= 5. qy


d. Total cost when Q = 2 is C(2) = 4 + 2*22 = 12. When Q = 10 C(Q) = 4 + 2*1
qy qy qy qy qy qy qy qy qy qy qy qy qy q y qy qy qy qy qy qy qy qy


02 = 204. qy qy


e. Marginal cost when Q = 2 is MC(Q) = 4(2) = 8. When Q = 10 MC(Q) = 4(10
qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


) = 40.qy qy



f. The level of Q that minimizes total cost is MC(Q) = 4Q = 0, or Q = 0.
qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


g. Net benefits are maximized when MNB(Q) = MB(Q) - MC(Q) = 0, or 20 –
qy qy qy qy qy qy qy qy qy qy qy qy qy qy


4Q –
qy qy


4Q = 0. Some algebra leads to Q = 20/8 = 2.5 as the level of output that ma
qy qy qy q y qy qy qy qy qy qy qy qy qy qy qy qy qy qy qy


ximizes net benefits. qy qy




10.
a. The present value of the stream of accounting profits is
qy qy qy qy qy qy qy qy qy




Managerial Economics and Business Strategy, 10 qy qy qy qy qy Page 3 qy


e

, b. The present value of the stream of economic profits is
qy qy qy qy qy qy qy qy qy




Page 4
qy Michael R. Baye & Jeffrey T. Prin
qy qy qy qy qy qy


ce