Q1. You were recently hired to replace the manager of the Roller Division at a major conveyor-manufacturing firm, despite the manager's strong external sales record. Roller manufacturing is relatively simple, requiring only labor and a machine that cuts and crimps rollers. As you begin reviewing the company's production information, you learn that labor is paid $12 pot hour and the last worker hired produced 80 rollers per hour. The company rents roller cutters and crimping machines for $15 per hour, and the marginal product of capital is 110 rollers per hour. What do you think the previous manager could have done to keep his job?

Q2. Recently, the Boeing Commercial Airline Group (SCAG) recorded orders for more than 15,000 jetliners and delivered more than 13,000 airplanes. To maintain its output volume, this Boeing division combines efforts of capital and more than 90,000 workers. Suppose the European company, Airbus, enjoys a similar production technology and produces a similar number of aircraft, but that labor costs (including fringe benefits) are higher in Europe than in the United States. Would you expect workers at Airbus to have the same marginal product as workers at Boeing? Explain carefully.

Q3. Discuss the impact of the following factors on the optimal ing an input.

a. Benefits from specialization.

b. Bureaucracy costs.

c. Opportunism on either side of the transaction.

d. Specialized investments.

e. Unspecifiable events.

f. Bargaining costs.

Q4. The A-I Corporation supplies airplane manufacturers with preformed sheet metal panels that tire used on the exterior of aircraft. Manufacturing these panels requires only five sheet metal-forming machines, which cost $500 each, and workers. These workers can be hired on an as-needed basis in the labor market at $9,000 each. Given the simplicity of the manufacturing Process, the preformed sheet metal panel market is highly competitive. Therefore, the market price for one of A- 1's panels is $80. Based on the production data in the accompanying table, how many workers should A-1 hire to maximize its profits?

Q5. Based on the information given, indicate whether the following industry is best characterized by the model of perfect competition, monopoly, monopolistic competition, or oligopoly.

a. Industry A has a four-firm concentration ratio of 0.005 percent and a Herfindahl-Hirschman index of 75. A representative firm has a Lerner index of 0.45 and a Rothschild index of 0.34.

b. Industry B has a four firm concentration ratio of 0.0001 percent and Herfindahl-Hirschman index of 55. A representative firm has a Lerner index of 0.0034 and Rothschild index of 0.00023.

c. Industry C has a four-firm concentration ratio of 100 percent and Herfindahl-Hirschman index of 10,000. A representative firm has a Lerner index 0.4 and Routhschild index of 1.0.

d. Industry D has a four-firm concentration ratio of 100 percent and Herfindahl-Hirschman index of 5,573. A representative firm has a Lerner index to 0.43 and Routhschild index of 0.76.

Q6. Recently, a 10-year contract between Boeing Commercial Airplane Group (BCAG) and Thyssen Inc.-a distributor of raw aluminum-expired. The contract, valued at $300 million when initially signed, stemmed from The Boeing's desire in the late 1990s to reduce production bottlenecks resulting from supply shortages. Declines in the demand for commercial aircraft during the past decade led some analysts to challenge BCAG's wisdom in signing such a long-term contract. Do you share this view? Explain.

Q7. Which of the following would most likely be scrutinized under the FTC and DOJ Horizontal Merger Guidelines?

a. Two major players in Internet services and retailing- Amazon.com and eBay-merge.

b. Cigarette maker Philip Morris merges with the Miller Brewing Company.

c. Lockheed Martin, a larger firm that manufactures aircraft, merges with United States Steel.