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DBA 815 Questions For Critical Thinking
DBA 815 Questions For Critical Thinking
1. Suppose the data in the table below represents the price of a base model hybrid automobile and the quantity of that model sold for 3 years. a. Draw and label the demand curves. b. Does this data indicate that the demand curve for this hybrid automobile is upward sloping? Why or why not? It indicates that the demand curve is downward sloping because there was a decrease in price and quantity over the three year period. The demand curve is never upward sloping.
Price
25,250
24,550
Quantity
33,250 35,265 36,466
2. The market for autographs by a superstar baseball player during the 1950s and 1960s indicates that while the players autograph is not rare it remains highly desirable and of relatively high price to collectors. In fact, a baseball signed by this superstar player is likely to sell for twice the price of baseballs signed by a teammate whose autograph is relatively rare. a. Use one graph to show both the demand and supply for autographs by the superstar and the demand and supply for autographs by the teammate and label the equilibrium point for both supply/demand curves.
Price
S1 S2
e
P1 P2
e
D1
D2
Quantity Q1 Q2
b. How it is possible for the price of the superstars autographs to be higher than the price of the teammates autographs even though the supply of superstar autographs is larger than the supply of teammate autographs? How does the graph display this information? I do believe that the price of the superstars autograph may be higher than that of the teammates autograph even though supply is higher. Supply is a decision that the company can opt to do even if price is high. There may be higher demands at different times and ensuring an optimum supply keeps the company ahead of the game. The graph shows that the higher the supplier reflects the high demand at a given price.
3. Assume that the demand for ethanol, a corn-based alternative fuel, decreases. As a result, ethanol producers petition the Environmental Protection Agency (EPA) to raise the allowable amount of ethanol in gasoline blends from 10 percent to 15 percent. a. Draw and accurately label the graph that reflects market for corn.
Price
S1 S2
P2 P1
D2
Q1
D1
Q2
Quantity
b. Draw and accurately label the graph that reflects market for tortillas.
Price
S2 S1
P1
D1 P2
D2 Quantity
Q2
Q1
c. If the EPA were to agree to the proposal to increase the amount of ethanol in blends from 10 percent to 15 percent, what would be the effect on the price of tortillas, also a corn-based product? If the EPA were to agree to the proposal and increase the blends from 10% to 15%, then the price in tortillas would increase because there would be a decrease in supply of corn to make tortillas. 4. Assume that the demand for Internet advertising is declining at the same time that the number of Internet sites accepting advertising is increasing. From this information, a student argues that that the price of Internet ads should fall, but it is not known whether the total quantity of Internet ads will increase or decrease. a. Assume the equilibrium price of Internet advertisements is initially P1 and the equilibrium quantity is Q1, draw and properly label a graph that reflects this situation. b. Draw and properly label a new supply curve for Internet advertisements (S2) and a new demand curve for advertisements (D2). c. Explain your graphs as they relate to the students analysis. Is the student correct? Why or why not? 5. The notion of rent controls can be somewhat controversial. 2011. Grand Canyon University. All Rights Reserved.
a. What is the economic rationale for a city to enact rent controls? Rent controls keep owners from overcharging tenants but allowing them to make some profit. The economic rationales for rent controls are to allow consumers to afford living expenses but be able to afford other products that boost the economy as well and not be overcharged. It also helps owners so that they will receive a fair amount of money for their property. b. What are a few unintended consequences of rent controls in large cities? Be specific. c. Is it more likely that a tenant will be blacklisted in a city with rent control or one without rent control? Explain. 6. Many factors affect the supply and demand of carbonated sodas. a. Draw and accurately label a graph that shows a decrease in the supply of sodas to the market, you must accurately label the graph. b. Draw and accurately label a graph that shows a drop in the average household income in the United States from $42,000 to $41,000. c. Draw and accurately label a graph that shows an improvement in the soda making technology. d. Draw and accurately label a graph that shows an increase in the price of high fructose corn syrup (the sugar used in sodas). Under what economic circumstances should soda producers switch back to using cane sugar? Are there any other managerial consequences to this question? e. What are the two most significant unintended economic consequences of a decrease in the supply of sodas? f. If you were seated on a cross-country flight next to the CEO of a major soda bottler who mentioned the troubling economic news of average family incomes falling, what would be your response? Include both short term and long-term upsides and downsides to the issue.