BUS 640 Managerial Economics Week Five Exercises

Applied Problems 5
Complete the
following problems from your text:
Chapter 11: Applied
Problem 8
Suppose you own a home remodeling company. You are
currently earning short-run profits. The home remodeling industry is an
increasing-cost industry. In the long run, what do you expect will happen to
a. Your firm’s
costs of production? Explain.
b. The price you
can charge for your modeling services? why?
c. Profits in home
remodeling? why?
Chapter 13: Applied
Problem 1
Show work and explain
analysis. Submit your answers to the instructor.
1) When McDonald’s
Corp. reduced the price of its Big Mac by 75 percent if customers also
purchased French fries and a soft drink, The Wall Street Journal reported that
the company was hoping the novel promotion would revive its U. S. sales growth.
It didn’t. Within two weeks sales had fallen. Using your knowledge of game
theory, what do you think disrupted McDonald’s plans?