Final Exam Sample Part 2-Marketing-Exam Paper, Exams of Marketing

Download Final Exam Sample Part 2-Marketing-Exam Paper and more Exams Marketing in PDF only on Docsity! SAMPLE FINAL EXAMINATION (Similar to exam given Tuesday, December 14, 1999, 9:00 a.m. to noon) Answer all of the following 9 questions. On numerical questions, please place a box around your final answer. Please write your name and Sloan section (or 15.011) on each book, and number your books. Leave the bottom of the front page blank, for the recording of grades. 1. Short Questions (60 points, 27 minutes). Please give brief answers to each of the following three questions. (1a) [Note: This problem is not covered this year.] Your company sells a surge protector for use with Palm Pilots. Your production engineers are worried, because your product volume needs to increase by 15% for revenues to cover costs. Demand, Q, for your product is currently described by Log Qt = 9.37 – .02 log Pt + .8 log It + .75 log Q t–1 , where P is the price of the device, I is current income, and “log” indicates a natural logarithm. Income is expected to rise by 10% next period, and remain at the new level after that. You are committed to holding prices fixed for the next several periods. Will the product be profitable next period? What hope is there for profitability in the longer term? (1b) You are the CEO of a company that makes FPLDD (fast portable laser disc drives). You host a party on your yacht for the CEO’s of all other companies that make FPLDDs. You give a speech where you say that you believe Christmas season demand might push prices up by 40%. You also note that demand often drops off after Christmas, but repeat your well-known commitment to trying to keep FPLDD prices stable over the long term. You propose the formation of a trade association that will collect and publish retail prices “for the benefit of consumers”. Your guests applaud and then return to the bar. Summarize the requirements of successful coordination. Which of these may be present here, and what may be missing? (1c) [Note: This problem is not covered this year.] Mercedes makes a Sport Utility Vehicle which sells for $50,000 and has few competitors; Chevrolet makes the Cavalier, which is a $12,000 economy car with lots of competitors. Would you expect one of these cars to have an advertising-to-sales ratio higher than the other, and if so which? Assume the advertising elasticity is the same for the two types of cars. docsity.com 2. Soybeans (50 points, 20 minutes). Consider the perfectly competitive U.S. market for soybeans. Suppose that domestic demand is given by Q = 10 – P, and that the domestic supply curve is Q = P, where Q is in Kg and P is $/Kg. There also is a world market in which any quantity of soybeans can be purchased for $2 per Kg. (2a) Assuming unrestricted imports of soybeans to the U.S. with no tariffs, compute (i) the equilibrium price of soybeans in the U.S., (ii) the quantity of soybeans sold in the U.S., and (iii) both U.S. consumer surplus and U.S. producer surplus at this equilibrium. (2b) Suppose the government imposes an import tariff of $4 per Kg on soybeans from the world market. Again compute equilibrium price, quantity, and consumer and producer surplus. (2c) What are the government revenues from the tariff? Calculate the deadweight loss associated with it, and show the result in a diagram. (2d) Briefly, explain as intuitively as possible the two sources of the deadweight loss in part 2c. 3. Advertising (40 points, 15 minutes). Consider a market in which there are two firms. Marginal costs for both firms are constant and equal to $4. While both firms are free to choose their respective advertising levels, A1 and A2, government regulation forces both firms to sell the product for $5 per unit. The demand curves for the two firms are given by: Q1 = 10 – P1 + P2 + A1 – A2 + A1A2 Q2 = 10 – P2 + P1 + A2 – A1 + A1A2 For both firms, the total cost of producing A units of advertising is A2 (that is, A squared). Find the Nash equilibrium levels of advertising, A1 and A2. 4. Two-Market Monopolist (40 points; 15 minutes) A monopolist must decide how to price in two markets and allocate product output between them. The markets are separated geographically (being on either side of a national border). Demands in the two markets are the following: Q1 = 30 – 2P1 , Q2 = 24 – P2 , where Q is units of product sold and P is $/unit. The monopolist’s cost is C = 5 + 2(Q1 + Q2). What are the prices charged, total product shipped to each market, and total profits under the following two conditions: 4a) The markets are separated (the firm can ship to both markets, but there is no other trade in the particular good). 4b) The border is opened to free trade. (This is Problem is similar to a problem set and a midterm question.) docsity.com