SOLUTION MANUAL FOR Managerial
Economics and Business Strategy 10th Edition By
Michael Baye, Jeff Prince
, Solution Manual for Managerial x x x
xEconomics and Business Strategy 10thx x x x
Michael Baye, Jeff Prince
x x x x
COMPLETE SOLUTION MANUAL FOR x x x
Managerial Economics and Business Strategy 10th Edition
x x x x x x
x By Michael Baye, Jeff Prince
x x x x
Chapter 1 x
The Fundamentals of Managerial Economics
x x x x
Answers to Questions and Problems
x x x x x
1. This xsituation xbest xrepresents xproducer-producer xrivalry. x Here, xSouthwest xis xa
xproducer xattempting xto xsteal xcustomers xaway xfrom xother xproducers xin xthe xform
xof xlower xprices.
2. The xmaximum xyou xwould xbe xwilling xto xpay xfor xthis xasset xis xthe xpresent
xvalue, xwhich xis
3.
a. Net xbenefits xare xN(Q) x= x20 x+ x24Q x– x4Q2.
b. Net xbenefits xwhen xQ x= x1 xare xN(1) x= x20 x+ x24 x– x4 x= x40 xand xwhen xQ x= x5 xthey
xare xN(5) x= x20 x+ x24(5) x– x4(5) x= x40.
2
c. Marginal xnet xbenefits xare xMNB(Q) x= x24 x– x8Q.
d. Marginal xnet xbenefits xwhen xQ x 1 xare xMNB(1) x= x24 x– x8(1) x= x16 xand xwhen xQ5
they xare xMNB(5) x= x24 x– x8(5) x= x-16.
e. Setting xMNB(Q) x= x24 x– x8Q x= x0 xand xsolving xfor xQ, xwe xsee xthat xnet xbenefits
xare xmaximized xwhen xQ x= x3.
Page x1
,
, f. When xnet xbenefits xare xmaximized xat xQ x= x3, xmarginal xnet xbenefits xare xzero. xThat
xis, xMNB(3) x= x24 x– x8(3) x= x0.
4.
a. The xvalue xof xthe xfirm xbefore xit xpays xout xcurrent xdividends xis
.
b. The xvalue xof xthe xfirm ximmediately xafter xpaying xthe xdividend xis
Managerial xEconomics xand xBusiness xStrategy, x10e
Copyright x© x2022 xby xMcGraw-Hill xEducation.
All xrights xreserved. xNo xreproduction xor xdistribution xwithout xthe xprior xwritten xconsent xof xMcGraw xHill xEducation.
.
5. The xpresent xvalue xof xthe xperpetual xstream xof xcash xflows. xThis xis xgiven xby
6. The xcompleted xtable xlooks xlike xthis:
Control Total Net Marginal
Total Marginal Marginal
xNet
xVariabl xBenefits xCost xBenefit xBenefit xCost
xBenefit
e xQ xB(Q) xC(Q s xN(Q) xMB(Q) xMC(Q)
xMNB(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 x2 Michael xR. xBaye x& xJeffrey xT.
xPrince
Economics and Business Strategy 10th Edition By
Michael Baye, Jeff Prince
, Solution Manual for Managerial x x x
xEconomics and Business Strategy 10thx x x x
Michael Baye, Jeff Prince
x x x x
COMPLETE SOLUTION MANUAL FOR x x x
Managerial Economics and Business Strategy 10th Edition
x x x x x x
x By Michael Baye, Jeff Prince
x x x x
Chapter 1 x
The Fundamentals of Managerial Economics
x x x x
Answers to Questions and Problems
x x x x x
1. This xsituation xbest xrepresents xproducer-producer xrivalry. x Here, xSouthwest xis xa
xproducer xattempting xto xsteal xcustomers xaway xfrom xother xproducers xin xthe xform
xof xlower xprices.
2. The xmaximum xyou xwould xbe xwilling xto xpay xfor xthis xasset xis xthe xpresent
xvalue, xwhich xis
3.
a. Net xbenefits xare xN(Q) x= x20 x+ x24Q x– x4Q2.
b. Net xbenefits xwhen xQ x= x1 xare xN(1) x= x20 x+ x24 x– x4 x= x40 xand xwhen xQ x= x5 xthey
xare xN(5) x= x20 x+ x24(5) x– x4(5) x= x40.
2
c. Marginal xnet xbenefits xare xMNB(Q) x= x24 x– x8Q.
d. Marginal xnet xbenefits xwhen xQ x 1 xare xMNB(1) x= x24 x– x8(1) x= x16 xand xwhen xQ5
they xare xMNB(5) x= x24 x– x8(5) x= x-16.
e. Setting xMNB(Q) x= x24 x– x8Q x= x0 xand xsolving xfor xQ, xwe xsee xthat xnet xbenefits
xare xmaximized xwhen xQ x= x3.
Page x1
,
, f. When xnet xbenefits xare xmaximized xat xQ x= x3, xmarginal xnet xbenefits xare xzero. xThat
xis, xMNB(3) x= x24 x– x8(3) x= x0.
4.
a. The xvalue xof xthe xfirm xbefore xit xpays xout xcurrent xdividends xis
.
b. The xvalue xof xthe xfirm ximmediately xafter xpaying xthe xdividend xis
Managerial xEconomics xand xBusiness xStrategy, x10e
Copyright x© x2022 xby xMcGraw-Hill xEducation.
All xrights xreserved. xNo xreproduction xor xdistribution xwithout xthe xprior xwritten xconsent xof xMcGraw xHill xEducation.
.
5. The xpresent xvalue xof xthe xperpetual xstream xof xcash xflows. xThis xis xgiven xby
6. The xcompleted xtable xlooks xlike xthis:
Control Total Net Marginal
Total Marginal Marginal
xNet
xVariabl xBenefits xCost xBenefit xBenefit xCost
xBenefit
e xQ xB(Q) xC(Q s xN(Q) xMB(Q) xMC(Q)
xMNB(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 x2 Michael xR. xBaye x& xJeffrey xT.
xPrince
