Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Homework #1 Managerial Economics 2021 IMBA, NCCU Due Date: Oct. 6th, 2021 1. Between 2001 and 2003, China Mobile’s number of subscribers grew from 90.6 to 141.6 million as the company added subscribers and acquired service providers in the poorer inland regions of China. However, over the same period, its average revenue per user (APRU) fell from 141 to 102 yuan per month and its proportion of subscribers using pre-paid service rose from 48% to 64%. (A) How would the entry of China Unicom affect the demand for China Mobile service? (B) How would China Mobile’s provision of pre-paid service affect the demand for its post-paid (contract) service? (C) Compare the demand for pre-paid service in the inland regions with that in the wealthier coastal regions. (D) Relate your discussion in (b) and (c) to China Mobile’s decline in ARPU. 2. In 1998, the value of worldwide sales of recorded music in the form of singles, music cassettes, and CDs was $38.7 billion. Americans bought 3.1 CDs and 0.6 music cassette per capita, while Mexicans bought 0.5 CD and 0.3 music cassette per capita. (A) Explain why per capita CD sales were relatively higher while per capita sales of music cassettes were relatively lower in the United States than in Mexico. (B) On a suitable diagram, draw the U.S. demand for music CDs. Explain how the following changes would affect the demand curve: (i) increase in the price of CDs; (ii) rise in the ownership of CD players; and (iii) fall in the price of music cassettes. (C) On another diagram, draw the demand for music CDs in Mexico. Explain how the following changes would affect the demand curve: (i) fall in advertising by music publishers such as Sony and Time Warner; (ii) reduction in the penalty for copyright infringement; and (iii) increase in the price of hamburgers. 3. The price of Chanel perfume is around $150 per fluid ounce, while the price of bottled water is $1 per gallon. Tiffany buys 2 fluid ounces of Chanel and 10 1 gallons of bottled water a month. (A) Using relevant demand curves, illustrate Tiffany's choices. Illustrate how the following changes will affect Tiffany's demand for Chanel perfume: (i) price decreases to $140 per fluid ounce, and (ii) increase in price of another of Tiffany's favorite perfumes. (B) Tiffany spends more money each month on perfume than bottled water. Does this necessarily mean that water gives her less total benefit than perfume? Use appropriate demand curves to address this question. 4. Suppose that a typical household's demand for long-distance call is represented by the equation D 200 4 p 0.4Y , where D is the quantity demanded in minutes a month, p is the price of calls in cents per minute, and Y is the household's income in thousands of dollars a year. Assume that Y=100. (A) Draw the household's demand curve. (B) How many minutes will the household buy at the price of 25 cents a minute? (C) What is the maximum lump sum that a long-distance carrier can charge the household for a package of 140 minutes of calls? (D) How can the long-distance carrier charge the household when it uses the two-part pricing method instead of package deal? 5. True or false. Explain why. (A) The demand for business travel is less elastic than that for leisure travel. (B) The price elasticity of demand for beer is smaller than the price elasticity of demand for Taiwan beer. (C) The long-run demand for a durable item is more income elastic than the short-run demand, while the long-run demand for a non-durable item is less income elastic than the short-run demand. 5. A study of the demand for gasoline at Boston-area service stations reported that the elasticity with respect to price (combining the pure price effect with the effect on waiting times) was -3.3, the elasticity with respect to station fueling capacity 2 was 0.7, and the elasticity with respect to the average price at nearby stations was 1.2 (Png & Reitman, 1984). (A) Explain why the elasticity with respect to the average price at nearby stations is a positive number. (B) Amy’s station is the only competitor to Al’s. Al's station has 2% more fueling capacity. Originally, both stations charged the same price. Then Amy reduced her price by 1%. What will be the difference in quantity demanded between the two stations? (C) If Amy raises capacity from 5 to 6 fueling places, by how much could she increase price without affecting sales? 3