# BUSI 620

Questions for Critical Thinking 4

Salvatore Chapter 8:

a. Discussion Questions: 2

b. Problems: 3, 4, 12(a) and (b), and spreadsheet problem 1 (p. 364).

Note:

1. P3(a): Calculate and compare the profit under each flight.

2. P3(b) is asking: Should Airway Express continue providing the flight between Los Angeles and New York? Even if Airway Express decides not to fly, it still has to pay the fixed costs of \$3,000 per day. The evening flight with the return flight the next afternoon is counted as 1 day, not 2 days.

3. P12: You do not need to draw the chart.

Salvatore Chapter 9:

1. Problems: 7, 11, and spreadsheet problem 1.

Note:

1. P7: The tariff-inclusive price will be \$3(1+.33) = \$4. What are the impacts of tariff on domestic consumption, domestic production, imports, and government’s tariff revenue? Show the numbers; for example, at figure 9-4, if you draw a line starting at Px=\$4 and parallel to the X axis, it will cross the demand curve, Dx, at 500X. Therefore, you know that the domestic consumption will decrease from 600X to 500X.

2. P11: The goal of publishers is to maximize profit.

3. Revised spreadsheet problem 1: Just answer 1(a) and 1(d). For 1(d), change “For (a) to (c)” to “For (a) only.”

Froeb et al. Chapter 9:

1. Individual problems: 9-2 and 9-4.

Note: P9-2: Think about substitutes and complements. For example, marijuana and snack foods are strong complements (or so we are told).

Froeb et al. Chapter 11:

1. Individual problems: 11-4 and 11-5.

Note:

1. P11-4: Use the carry trade to predict the impact of lower U.S. interest rates on Euro/\$.

2. P11-5: Make sure you explain the impact on the twin cities, not just 1 city.

Submit this assignment by 11:59 p.m. (ET) on Sunday of Module/Week 4.

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