# Managerial Economics 510, Problem Set 2.. Chap 4. P.8: Chap 5. P.6:

Jul 14th, 2016
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8. A food-products company has recently introduced a new line of fruit pies in six U.S. cities: Atlanta, Baltimore, Chicago, Denver, St. Louis, and Fort Lauderdale. Based on the pie’s apparent success, the company is considering a nationwide launch. Before doing so, it has decided to use data collected during a two-year market test to guide it in setting prices and forecasting future demand. For each of the six markets, 6. Making dresses is a labor-intensive process. Indeed, the production function of a dressmaking firm is well described by the equation Q  L  L2/800, where Q denotes the number of dresses per week and L is the number of labor hours per week. The firm’s additional cost of hiring an extra hour of labor is about \$20 per hour (wage plus fringe benefits). The firm faces the fixed selling price, P  \$40.

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Problem Set 2Problem 8 from chapter 4a.)We require a value of t > 2 to make a variable significant. Value of T = value of coefficient /standard error. According to this rule all variables other than population are significant becausefor population value of t = .4/.31 <2How much of the total variation in pie sales does the regression model explain?=93% as we can see from the value of R2b.)Price elas =.3590.6*7.5/20000= -1.34647For each \$1 increase in the price the demand decreases by 1.34647*20000 = 26929.4 unitsCross price elas = 4226.5*6.5/20000=+1.3736For each \$1 increase in price of the competitor the demand increases 1.3736*20000 = 27472unitsc.)This equation shows that the quarterly sales will increase and from this sense we canexpect the sales to increase in the next year.The equation is terms of only quarter sales only and if we want to predict the annualTrends o

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