Applied Managerial Economics

Paper instructions:
The board of directors at AutoEdge is actively discussing several options to address flagging

revenue. One option continues to surface during each board meeting; that is, relocating the

manufacturing operation back to the United States. Longtime Chief Financial Officer, Ingrid Adams, leads

the group that is in favor of this option.

Ingrid Adams approaches you in the company break room.

“Hello,” she says. “I’m glad I saw you.”

“Hi,” you say. “What can I do for you?”

“I have a question about economics,” she says. “I think you can help me explain something to some

shareholders on the board.”

“Economics! My favorite subject,” you say. “What’s your question?”

“If AutoEdge decided to increase its prices and return to the United States,” she says, “how would

this action affect consumer demand? I want to know your opinion about elasticity.”

“Sure,” you say. “So you want to know if the elasticity for auto parts is considered to be relatively

inelastic, relatively elastic, unitary elastic, perfectly elastic, or perfectly inelastic. Right?”

“Exactly,” she says.

“I have an opinion,” you say. “Do you want to talk about it now, or do you want something in

writing?”

“Something in writing would be best,” she says. “Would you explain your opinion so that I can respond

to questions from other members of the board, too?”

Applied Managerial Economics

Order Description

At midday, you share an elevator ride with AutoEdge’s Executive Vice President, George Wirtz.

“Ingrid tells me you gave her some useful information about the relocation issue,” he says. “I could use your help with a presentation I’m making next week to a group of large shareholders.”

“Of course,” you say. “How can I help?”

“I understand that there are four different types of market structures: monopoly, oligopoly, monopolistic competition, and pure competition,” he says. “I know that each of these market structures differs in the number of companies that compete in each one, the level of competition, entry and exit in the economy, the product price range, and the product range.”

“I’m with you so far,” you say.

“Normally, I wouldn’t go into all of these economic terms with shareholders,” he says, “but I’ll be talking to a small group of sophisticated businesspeople who understand the terminology. I’m not an expert in this end of the business, and I want to check my understanding of it. What type of market structure does AutoEdge fit into? How does this market structure impact our level of competition, elasticity of demand, price, and position in the industry?”

“Well, there’s a long and a short answer I could give you,” you say. “I’m on my way to a lunch meeting right now and will be out of the office for the rest of the afternoon. Would it be okay if I send an e-mail later this afternoon?”

“Yes,” he says. “That would be fine, but I want some research to support the information, too. Would you be able to send me a report about this by the end of this week?”

“Sure,” you say. “I’ve already done some of the research, so that deadline is doable.”

“Oh good,” he says. “I appreciate your help!”

Answer all questions that Mr. George Wirtz asked of you in this small dialogue in the elevator. Explain in detail.

Applied Managerial Economics

Order Description

At midday, you share an elevator ride with AutoEdge’s Executive Vice President, George Wirtz.

“Ingrid tells me you gave her some useful information about the relocation issue,” he says. “I could use your help with a presentation I’m making next week to a group of large shareholders.”

“Of course,” you say. “How can I help?”

“I understand that there are four different types of market structures: monopoly, oligopoly, monopolistic competition, and pure competition,” he says. “I know that each of these market structures differs in the number of companies that compete in each one, the level of competition, entry and exit in the economy, the product price range, and the product range.”

“I’m with you so far,” you say.

“Normally, I wouldn’t go into all of these economic terms with shareholders,” he says, “but I’ll be talking to a small group of sophisticated businesspeople who understand the terminology. I’m not an expert in this end of the business, and I want to check my understanding of it. What type of market structure does AutoEdge fit into? How does this market structure impact our level of competition, elasticity of demand, price, and position in the industry?”

“Well, there’s a long and a short answer I could give you,” you say. “I’m on my way to a lunch meeting right now and will be out of the office for the rest of the afternoon. Would it be okay if I send an e-mail later this afternoon?”

“Yes,” he says. “That would be fine, but I want some research to support the information, too. Would you be able to send me a report about this by the end of this week?”

“Sure,” you say. “I’ve already done some of the research, so that deadline is doable.”

“Oh good,” he says. “I appreciate your help!”

Answer all questions that Mr. George Wirtz asked of you in this small dialogue in the elevator. Explain in detail.