Managerial Economics 2012, Class 6, Midterm Test

Name ________________________________________ Date: October 19, 2012

Managerial Economics 2012, Class 6, Midterm Test

1. Why TV series became so popular and profitable in movie industry? Describe the cost side of the phenomenon. (2 points)

2. An internet music store sells MP3 files to smartphone users. The web-site detect the operating system of the smartphone and offer 20% higher price for MP3 if this is a user of Apple iPhone than the user of Samsung Galaxy. Why? (2 points)

	Firm 2
Romance	Suspense
Firm 1	Romance	600, 600	700, 700
Suspense	700, 700	400, 400

3. Firm 1 and firm 2 are movie producers. Each has the option of producing a blockbuster romance or a blockbuster suspense film. The payoff matrix displaying the payoffs for each of the four possible strategy combinations (in thousands) is shown below, with firm 1's payoff listed first. Find the Nash equilibrium. Are there dominant and dominated strategies? (2 points)

4. Suppose your marketing department does a survey of potential users and finds that these users place the following values on the two versions of your software:

Software Version	Home Users	Commercial Users
Disabled version	$150	$125
Full-featured version	$175	$225

1. Assume that the numbers of home users is three times higher than commercial users, and the MC of production is zero. What prices should you charge if you cannot distinguish home and commercial users? Explain your answer. (2 points)

1. How your answer would change if the marginal cost would be $160? (2 points)

Name ________________________________________ Date: October 19, 2012

Managerial Economics 2012, Class 6, Midterm Test

5. The sport equipment company invented and patented a highly innovative gym apparatus. The marginal cost of production of this product is constant and equals $100. The managers of the company conducted the survey of 100 randomly chosen potential users of this apparatus and found that their demand for it may be described as Q=130-0,1P. The population of the country’s capital where the production facilities are located is 1 million people. It is known that potential users of this apparatus comprise 10% of general population.

1. At what price should the company offer this product at this city to maximize profit? What will be market demand at this price and company’s profit? (2 points)

1. There is a neighbor city located not very far from the capital and has the population of 0.5 million. The cost of transportation to this city is $50. How many apparatuses should the company send to that city and what price should be offered to the people there? (2 points)

6. This is the market of the beef in the Russia. Russia joins WTO and the domestic market of Russia becomes open for export and import.

a) How the demand and supply curves change in the Russian beef market change if there is perfect competition in the international market and no activity in Russian market can influence international price? Assume that international price is lower that the domestic price of Russia.
(3 points)

b) How the demand and supply curves change if import of beef to Russia or export of beef from Russia can somewhat influence international price. Assume that international price is higher that the domestic price of Russia. (3 points)

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