Managerial Economics No Plagiarism Turnit in Submission. Question 1 (1-2 pages) 1. Transcendent Technologies is deciding between developing complicated, thought-activated software, or simple, voic

Managerial Economics

No Plagiarism Turnit in Submission.

Question 1 (1-2 pages)

1. Transcendent Technologies is deciding between developing complicated, thought-activated software, or simple, voice-activated software. The voice-activated software would cost $50 million to develop and has a 60% chance of being successfully launched and generating revenue of $100 million. The thought-activated software would be a bonanza if successful, generating $1 billion in revenue. But it is so complicated, it is projected to cost would be $400 million. How likely would success have to be for Transcendent Technologies to opt for the thought-activated software?

2. At an oral auction for used car, half of all bidders have a value of $1,500 and half have a value of $1,900. What is the expected winning bid if there are three bidders?

No Plagiarism Turnit in Submission.

Question 2 (1-2 pages)

1. Oscar’s Outdoor Signage employs salesmen to find new advertisers for existing signs. In an average month, salaried sales staff can keep 80 of 100 signs under contract in a given month. When Oscar experimented with a bonus of $100 for each sign under contract this was increased to 90 of 100 signs. How large must the contribution margin on a sign be to make it profitable to offer the bonuses?

2. A common complaint is that a new car will depreciate by 25% as soon as the new owner drives it off the lot. This information comes from resale price data from cars sold just months after the initial purchase. How does adverse selection imply that most cars depreciate much less?