Textbook: Paul Keat and Philip Young, Managerial Economics: Economic Tools for T

Question

Textbook: Paul Keat and Philip Young, Managerial Economics: Economic Tools for Today’s Decision Makers, 7th Ed.

Reading Assignment –week one

Chapter 1 Introduction

Question 4

Chapter 2 The firm and its goals

Question 10

Chapter 3 Supply and demand

Question 3

4. Define the market process, the command process, and the traditional process. How does each process deal with the basic questions of what, how, and for whom ?

10. Because of inflation, a company must replace one of its (fully depreciated) machines at twice the nominal price paid for a similar machine 8 years ago. Based on present account-ing rules, will the company have covered the entire cost of the new machine through depre-ciation charges? Explain by contrasting accounting and economic costs.

3. The following relations describe the supply and demand for posters D-65000-10000P ,--35,000 15 000P where Qis the quanity and Pis the price of a poster, in dollars. a. Complete the following table. Price Qs Surplus or Shortage $6.00 5.00 4.00 3.00 2.00 1.00 b. What is the equilibrium price?

Explanation / Answer

Market process refers to the use of supply, demand and material incentives to decide how scare resources are to be allowed.

Traditional process refers to use of customs and traditions to answer the questions of what, how, and for whom

Command process refers to the use of central planning and directives of government to answers the questions of what, how, and whom

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