Homework 0
This first homework assignment is a simple review of the calculus prerequisite to this course. Specifically, calculating a derivative of a quadratic function, and solving two linear equations for two variables.

Homework Question 1: Find the quantity and price that maximize profit for a firm with demand Q = 133.33 - (1/3)P and cost function is C(Q) = 25000 + Q²

Homework Question 2: Find the quantities that solve the equations
Q2= 2- .5Q1
Q1= 2- .5Q2

Homework 1
Market Equilibrium
The first two problems apply the theory of Market Equilibrium to the managerial problem of choosing output price and quantity when there are many competing buyers and many competing sellers for a commodity. Note:
Almost all of your homework and exam problems use continuous units of demand and supply quantities to simplify computations.
The rule throughout all exam and homework problems is units are continuous unless the problem explicitly says units are discrete (integers only).
The first two problems are discrete units. Their purpose is to show problems can be done in discrete units, but the analysis is just more complex than if units were continuous.

A.1 Market Equilibrium
Question 1: Suppose there are five people interested in buying a hat: The first is willing to pay as much as
$32 for a hat; the second, as much as $22; the third, as much as $16; the fourth, as much as $12; and the fifth, as much as $8.
Also suppose there are five people interested in selling a hat: The first is willing to accept as little as $24 for a hat; the second, as little as $30; the third, as little as $36; the fourth, as little as $42; and the fifth, as little as $50. Compute the competitive-equilibrium price and quantity of hats if all those people trade on eBay. In your answer, compute demand and supply in discrete units.

A.1 Market Equilibrium
Question 2: Suppose there are five people interested in buying a jacket: The first is willing to pay as much
as $33 for a jacket; the second, as much as $27; the third, as much as $24; the fourth, as much as $17;
and the fifth, as much as $8.
Also suppose there are four people interested in selling a jacket: The first is willing to accept as little as $32 for a jacket; the second, as little as $22; the third, as little as $14; and the fourth, as little as $8
Compute the competitive-equilibrium price and quantity of jackets if all those people trade on eBay. In your answer, compute demand and supply in discrete units.

Price Restrictions
The final two problems apply the theory of Price Restrictions to the managerial problem of choosing
output price and quantity when the government intervenes in the economy by restricting prices. Note:
Price restrictions have ironic effects. When the government intends to reduce the price of a good (like medical care) to help consumers, there are unintended consequences (like shortage of medical care) the increase the price of that good, which hurts consumers.
The second problem includes a prohibition of a good, which is just like an extreme price control, where the price is set to zero. The reasoning that uncovers the unintended consequences of such a prohibition helps you analyze the nature of a recent incident in China (AP) BEIJING - Authorities have indicted five people in central China for involvement in illegal organ trading after a teenager sold one of his kidneys to buy an iPhone and an iPad. The case has prompted an outpouring of concern that not enough is being done to guard against the negative impact of increasing consumerism in Chinese society, particularly among young people who have grown up with more creature comforts than the generations before them. Prosecutors in the city of Chenzhou charged the suspects with intentional injury for organizing the removal and transplant of a kidney from a 17 year-old high school student surnamed Wang, the official Xinhua News Agency said late Friday.
Your study of managerial economics helps you find the underlying problem. Is it those harvesting the organs, and exploiting the teenager? Or, is it the extreme poverty of the teenager that led him to decide to sell a kidney?
Your study helps you focus on the fact that the willing donor is a teenager (who as a rule can be foolish), and makes you consider whether the probation should be lifted for adults (who should know what is best for themselves).

A.2 Price Restrictions
RENT-CONTROL
Question 3: Suppose demand and supply for a commodity are Q° = 48 - 2P and Qs =-7 + 3P
a. For that commodity, compute equilibrium price, quantity, consumer surplus, and producer surplus.
b. Suppose that commodity with Qd = 48 - 2P and Qs = -7 + 3P were unskilled labor and Democrats in the House of Representatives pass a federal minimum wage of $17 per hour (with the intention of reducing income inequality). Compute the effect of that minimum wage on unskilled labor.
C. Now instead, suppose that commodity with Qd = 48 - 2P and Qs = -7 + 3P were urgent medical care and a maximum price of $9 is imposed (with the intention of being compassionate by making medical care more affordable). Compute the effect of that maximum price on buyers.

Question 4: Suppose demand and supply for a commodity are Qd = 99 - 3P and Qs = 6 + 2P
a. For that commodity, compute equilibrium price, quantity, and consumer surplus. (You do not need to compute producer surplus.)
b. Suppose that commodity with Qd = 99 - 3P and Qs = 6 + 2P were unskilled labor and Democrats in the House of Representatives pass a federal minimum wage of $22 per hour (with the intention of reducing income inequality). Compute the effect of that minimum wage on unskilled labor.
C. Now instead, suppose that commodity with Qd = 99 - 3P and Qs = 6 + 2P were human kidneys and a federal law makes selling any human organs a federal felony (while donating organs is still allowed, that law would prohibit a recent sales attempt on Ebay "Fully functional kidney for sale. You can choose either kidney. Buyer pays all transplant and medical costs. Of course, only one for sale, as I need the other one to live. Serious bids only."). Compute the effect of that federal law on buyers.

Homework 0 This first homework assignment is a simple review of th...