Chapter 1 Managerial Economics

Chapter 1 Managerial Economics

1. (5 points) In the pursuit of profits, why would companies sell an open source product as opposed to a proprietary product? For example, Android is an open source software which any company can download and install on their products. Of course, every company that uses Android modifies it for their product, and this can be done because the product is open source. Apple, on the other hand, uses a software for all its products which will work only on Apple’s products (proprietary).

Why would a company choose open-source as opposed to the proprietary model (or vice –versa)? Does one model increase profits more than the other? Please give an explanation.

2. (5 points) You wish to buy a car worth $20,000. You have the money in your savings account. Should you go ahead and pay cash for the car (out of your savings account) or should you get a car loan from the dealer or from your bank to pay for the car? How do your expectations about interest rates have an impact on your decision? Please give an explanation.

3. (5 points) Explain how the decision to open up a restaurant after a shutdown due to the current pandemic is a balancing act between marginal benefits and marginal cost. Explain what the marginal benefits and marginal costs are for opening up and why a restaurant owner might decide not to open up even if the government permits them to do so.

4. (5 points) When you are buying a car from an individual and are negotiating with that person, is this an example of the consumer-producer, consumer-consumer, or the producer-producer rivalry. Please explain.

5. (5 points) If the annual interest rate is 0 percent, what is the present value of receiving $1.10 each year for the next 5 years? Please show your calculations.