KSBM – Managerial Economics 1- At a management luncheon, two managers were overheard arguing about the following stamen: “A manager should never hire another worker

At a management luncheon, two managers

 Managerial Economics 1



Q1. Evaluate the following statements using graphical analysis. Provide a brief narrative explanation of your graph to support your evaluation. Make sure the awes and curves in your graphs are properly labeled.

a) “When demand for home heating oil increases, a shortage of heating oil will occur.”

b) “A decrease in the supply of random access memory (RAM) chips for personal computers causes a shortage of RAM chips.”Using optimization theory, analyze the following quotations:

c) “The optimal number of traffic deaths in the United States is zero.”

d) “Any pollution is too much pollution.”

e) “We cannot pull U.S. troops of Afghanistan. We have committed so much already.”

d) “If Congress cuts out the NASA space station, we will have wasted all the resources that we have already spent on it. Therefore, we must continue funding it.”

e) “Since Jet Green Airways has experienced a 25 percent increase in its insurance premium, the airline should increase the number passengers it serves next quarter order to spread the increase in premiums over a larger number of tickets.”

Q2. Two partners who own progressive Business Solutions, which currently operates out of an office in a small town near Boston, just discovered a vacancy in an office building in downtown Boston. One of the partners favors moving downtown because she believes the additional business gained by moving downtown will exceed the higher rent at the downtown location plus the cost of making the move. The other partner at PBS opposes moving downtown. He argues, ‘we have already paid for office stationery, business cards, and a large sign that cannot be moved or sold. We have spent so much on our current office that we can’t afford to waste this money by moving now.” Evaluate the second partner’s advice not to move downtown.

a) Given that Bill can consume only 167 grams of carbohydrates daily, how many cups of each food will he consume daily? Show your work.

b) Suppose Bill’s doctor tells him to further reduce his carbohydrate intake to 126 grams per day. What combination will he consume?

Q3. At a management luncheon, two managers were overheard arguing about the following stamen: “A manager should never hire another worker if the new person causes diminishing returns.” Is this statement correct? If so, why? If not, explain why not.



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