Managerial Economics 12th Edition by Mark Hirschey

Exercise 3

Describe the effects of each of the following managerial decisions or economic influences on the value of the firm:
A. The firm is required to install new equipment to reduce air pollution.
B. Through heavy expenditures on advertising, the firm's marketing department increases sales substantially.
C. The production department purchases new equipment that lowers manufacturing costs.
D. The firm raises prices. Quantity demanded in the short run is unaffected, but in the longer run, unit sales are expected to decline.
E. The Federal Reserve System takes actions that lower interest rates dramatically.
F. An expected increase in inflation causes generally higher interest rates, and, hence, the discount rate increases.