Ateneo de Zamboanga University

School of Management and Accountancy

Fr Eusebio, SJ Campus, La Purisima St., Zamboanga City

Managerial Economics
(Summer / SY. 2022-2023)

Group Members: Section:

General Directions:

• Submit it before or on JULY 21, 2023 (WENESDAY) @ 3:00 PM. (HARD COPY)
• In any problem solving question(s), you are expected to show your solution to get a full mark or a partial
points.
•For essay question(s) you will be graded according to the following criteria: Content (30%),
Organization (30%), and Justification (40%).

Problem Set 1

1. Southwest Airlines begins a “Bags Fly Free” campaign, charging no fees for the first and
second checked bags. Does this situation best represent producer–producer rivalry,
consumer–consumer rivalry, or consumer–producer rivalry? Explain. – 10 POINTS

2. Jaynet spends Php 30,000 per year on painting supplies and storage space. She recently
received two job offers from a famous marketing firm—one offer was for Php 110,000 per
year and the other was for Php 80,000. However, she turned both jobs down to continue a
painting career. If Jaynet sells 25 paintings per year at a price of Php 8,000 each.

a. What are her accounting profits? (3 POINTS)

b. What are her economic profits? (7 POINTS)

3. Describe the trade-offs faced by a worker in a hotel deciding whether to accept the offer by
her manager of extra shifts in the restaurant.( 10 POINTS)

4. Suppose that the total benefit and total cost from a continuous activity are, respectively,
given by the following equations: B(Q) = 100 + 36Q − 4Q2
and C(Q) = 80 + 12Q.
a. What level of Q maximizes net benefits? (5 POINTS)
b. At the value of Q that maximizes net benefits, what is the value of marginal net benefits?
(5 POINTS)

5. You are in the market for a new refrigerator for your company’s lounge. You have narrowed
the search down to 2 models. The energy efficient model sells for Php 700 and will save you
Php 45 at the end of each of the next 5 years in electricity costs. The standard model has the
same features as the energy efficient model, but no savings in electricity costs. It is priced
only at Php 500.

a. Assuming that the discount rate is 6% and each refrigerator will last 5 years (and have the
same scrap value), which refrigerator should you purchase? 5 points
b. If the savings from the energy efficient model go up to Php75 a year because of higher
electricity costs, will your decision change? Why? 5 points