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Solution Manual For
Managerial Economics, 9th Edition William F. Samuelson,
Stephen G. Marks, Jay L. Zagorsky
Answers to
Back-of-Chapter
Problems
Chapter 1
1. Managerial economics is the analysis of important
management decisions using the tools of economics. Most
business decisions are motivated by the goal of maximizing
the firm‟s profit. The tools of managerial economics
provide a guide to profitmaximizing decisions.
2. i) Multinational Production and Pricing. The global
automobile company needs information on 1) demand
(how many vehicles can be sold in each market at different
prices), 2) plant capacities and production costs, and 3)
trade barriers and tariffs.
,ii) Market Entry. Remember that Uber began as a ridesharing
idea, before ultimately becoming a market disruptor with
respect to the long established taxicab industry. Crucial
necessary information and questions include: Would city
regulators allow Uber to operate at all? What market niche
(how much demand) could it carve out of the taxi and car
service markets? At what prices relative to taxis? Would
customers trust a rideshare service? How many drivers
could rideshare firms attract and at what costs?
iii) Building a New Bridge. The authority should estimate
usage of the bridge over its useful life, the likely cost of
building and maintaining the bridge, and other important
side-effects, pro and con -- including positive effects on
business activity and the impacts on air pollution and traffic
congestion.
iv) A Regulatory Problem. Before deciding whether to
promote the oil-to-coal conversion, government regulators
need information on how much oil would be saved (and the
dollar value of savings) and the cost of the chain of side-
effects -- not only the direct cost of electricity provision but
also pollution costs and environmental damage.
,v) Boeing and the 737 Max. Boeing gathered extensive
information on potential airline demand for a new more
fuel-efficient aircraft, yet considerable uncertainty
remained with respect to future orders. Would the new
aircraft shift significant orders and sales
from Airbus, Boeing‟s longtime rival? Could Boeing
achieve its aggressive R&D and production plan on budget
and on schedule? Could it address and solve myriad
reliability and safety problems, big and small? How severe
would be ongoing regulatory oversight and how high a
bar would the FAA set for certification requirements? Five
or ten years from now, would the world economy
continue to grow, fueling strong demand for air travel and
for the new and improved aircraft?
vi) An R&D Decision. The pharmaceutical company should
quiz its scientists on the chances of success (and the
timetable for completion) for each R&D approach. The
company's marketing department would supply estimates
of possible revenues from the drug; its production
department would estimate possible costs.
vii) David Letterman. Dave must carefully assess what he
wants from a new contract (in particular how much he
values the earlier time slot). As the negotiations unfold,
, Dave will glean valuable information as to the current
competing offers of CBS and NBC. Of course, Dave must
also try to assess how far the two networks might be willing
to go in sweetening their offers.
3. The six steps might lead the soft-drink firm to consider the
following questions. Step 1:
What is the context? Is this the firm‟s first such soft
drink? Will it be first to the marketplace, or is it imitating
a competitor? Step 2: What is the profit potential for such
a drink? Would the drink achieve other objectives? Is the
fruit drink complementary to
the firm‟s other products? Would it enhance the firm‟s
image? Step 3: Which of six versions of the drink should
the firm introduce? When (now or later) and where
(regionally, nationally, or internationally) should it
introduce the drink? What is an
appropriate advertising and promotion policy? Step 4:
What are the firm‟s profit forecasts for the drink in its
first, second, and third years? What are the chances that
the drink will be a failure after 15 months? Should the
firm test market the drink before launching it? Step 5:
Based on the answers to the questions in Steps 1 through
4, what is
Solution Manual For
Managerial Economics, 9th Edition William F. Samuelson,
Stephen G. Marks, Jay L. Zagorsky
Answers to
Back-of-Chapter
Problems
Chapter 1
1. Managerial economics is the analysis of important
management decisions using the tools of economics. Most
business decisions are motivated by the goal of maximizing
the firm‟s profit. The tools of managerial economics
provide a guide to profitmaximizing decisions.
2. i) Multinational Production and Pricing. The global
automobile company needs information on 1) demand
(how many vehicles can be sold in each market at different
prices), 2) plant capacities and production costs, and 3)
trade barriers and tariffs.
,ii) Market Entry. Remember that Uber began as a ridesharing
idea, before ultimately becoming a market disruptor with
respect to the long established taxicab industry. Crucial
necessary information and questions include: Would city
regulators allow Uber to operate at all? What market niche
(how much demand) could it carve out of the taxi and car
service markets? At what prices relative to taxis? Would
customers trust a rideshare service? How many drivers
could rideshare firms attract and at what costs?
iii) Building a New Bridge. The authority should estimate
usage of the bridge over its useful life, the likely cost of
building and maintaining the bridge, and other important
side-effects, pro and con -- including positive effects on
business activity and the impacts on air pollution and traffic
congestion.
iv) A Regulatory Problem. Before deciding whether to
promote the oil-to-coal conversion, government regulators
need information on how much oil would be saved (and the
dollar value of savings) and the cost of the chain of side-
effects -- not only the direct cost of electricity provision but
also pollution costs and environmental damage.
,v) Boeing and the 737 Max. Boeing gathered extensive
information on potential airline demand for a new more
fuel-efficient aircraft, yet considerable uncertainty
remained with respect to future orders. Would the new
aircraft shift significant orders and sales
from Airbus, Boeing‟s longtime rival? Could Boeing
achieve its aggressive R&D and production plan on budget
and on schedule? Could it address and solve myriad
reliability and safety problems, big and small? How severe
would be ongoing regulatory oversight and how high a
bar would the FAA set for certification requirements? Five
or ten years from now, would the world economy
continue to grow, fueling strong demand for air travel and
for the new and improved aircraft?
vi) An R&D Decision. The pharmaceutical company should
quiz its scientists on the chances of success (and the
timetable for completion) for each R&D approach. The
company's marketing department would supply estimates
of possible revenues from the drug; its production
department would estimate possible costs.
vii) David Letterman. Dave must carefully assess what he
wants from a new contract (in particular how much he
values the earlier time slot). As the negotiations unfold,
, Dave will glean valuable information as to the current
competing offers of CBS and NBC. Of course, Dave must
also try to assess how far the two networks might be willing
to go in sweetening their offers.
3. The six steps might lead the soft-drink firm to consider the
following questions. Step 1:
What is the context? Is this the firm‟s first such soft
drink? Will it be first to the marketplace, or is it imitating
a competitor? Step 2: What is the profit potential for such
a drink? Would the drink achieve other objectives? Is the
fruit drink complementary to
the firm‟s other products? Would it enhance the firm‟s
image? Step 3: Which of six versions of the drink should
the firm introduce? When (now or later) and where
(regionally, nationally, or internationally) should it
introduce the drink? What is an
appropriate advertising and promotion policy? Step 4:
What are the firm‟s profit forecasts for the drink in its
first, second, and third years? What are the chances that
the drink will be a failure after 15 months? Should the
firm test market the drink before launching it? Step 5:
Based on the answers to the questions in Steps 1 through
4, what is
