CT3

See attachment

CRITICAL

THINKING ASSIGNMENT 3

NAME:

TOTAL POINTS POSSIBLE: 80

TOTAL POINTS ATTAINED: 0

Supporting

Calculations Spreadsheet: Use the following spreadsheet for any supporting calculations for this assignment. For any question for which you have put supporting calculations on the spreadsheet, please indicate so in your answer to that question.

Salvatore 6: Discussion Question 2

Points Possible

5

Points Attained

Question:

(a) What are qualitative forecasts? What are the most important forms of qualitative forecasts? (b) What is their rationale and usefulness?

Answer:

Instructor Comments:

Salvatore 6: Discussion Question 3

Points Possible

5

Points Attained

Question:

(a)What are time- series data? What are the possible sources of variation in time- series data? (d) Why does time- series analysis deal primarily with trend and seasonal variations rather than with cyclical and irregular or random variations?

Answer:

Instructor Comments:

Salvatore 6: Discussion Question 15

Points Possible

5

Points Attained

Question:

Explain why it is still useful to pursue forecasting even though it is often off the mark by wide margins.

Answer:

Instructor Comments:

Salvatore 6: Problem 7

Points Possible

5

Points Attained

Question:

The following table presents data on three leading indicators for a three-month period. Construct the composite index (with each indicator assigned equal weight) and the diffusion index.

NOTE: 1. P7: The composite index is obtained by calculating the percentage change for each series relative to the base month and then averaging these percentage changes. The percentage change from the first to the second month is 10 for indicator A, 15 for indicator B, and −10 for indicator C. Their simple average (since each indicator is given equal weight) is 5 percent. Taking the first month as the base period with a composite index of 100, we obtain the composite index of 105 for the second month. The diffusion index from month 1 to 2 is 66.7 (=2/3) because two indicators move up and move down (see p. 239).

Answer:

Instructor Comments:

Salvatore 6: Appendix Problem 1

Points Possible

10

Points Attained

Question: Use the following spreadsheet for this problem

1. The following table reports the Consumer Price Index for the Los Angeles area on a monthly basis from January 1998 to December 2000 (base year = 1982–1984). Eliminating the data for 2000, use Excel to forecast the index for all of 2000 using a three- and six- month average. Which provides a better forecast for 2000 using the data provided?
NOTE: 2. Appendix problem 1: Delete “Eliminating the data for 2000.” You need to calculate the moving average forecasts and R

MSE

s for year 2000, not the whole data period.

Answer:

Instructor Comments:

Salvatore 6: Appendix Problem 3

Points Possible

10

Points Attained

Question: Use the following spreadsheet for this question.

3. Forecast the data for 2000 again in Problem 1 with exponential smoothing with w = 0.3 and w =

0.7

. Is this a better forecast than the moving average?
NOTE: 3. Appendix problem 3: Compare

RMSE

s for moving average and exponential forecasts to answer “Is this a better forecast than the moving average” (see also p. 237)? Use

166.6

3

, the mean of all 36 months, as the initial forecast for Jan. 1998 for both exponential smoothing forecasts.

Answer:

Instructor Comments:

Salvatore 7: Discussion Question 3

Points Possible

5

Points Attained

Question:

(a) How is the law of diminishing returns reflected in the shape of the total product curve? (b) What is the relationship between diminishing returns and the stages of production?

Answer:

Instructor Comments:

Salvatore 7: Discussion Question 11

Points Possible

5

Points Attained

Question:

Minimum wage legislation requires most firms to pay workers no less than the legislated minimum wage per hour. Using marginal productivity theory, explain how a change in the minimum wage affects the employment of unskilled labor.

Answer:

Instructor Comments:

Salvatore 7: Discussion Question 13

Points Possible

10

Points Attained

Question:

Does the production function of Table 7-1 show constant, increasing, or decreasing returns to scale if the firm increases the quantity of labor and capital used from (a) 2L and 2K to 4L and 4K? (b) 2L and 4K to 3L and 6K?

Answer:

Instructor Comments:

Salvatore 7: Problem 4

Points Possible

10

Points Attained

Question:

Ms. Smith, the owner and manager of the Clear Duplicating Service located near a major university, is contemplating keeping her shop open after 4 p.m. and until midnight. In order to do so, she would have to hire additional workers. She estimates that the additional workers would generate the following total output (where each unit of output refers to 100 pages duplicated). If the price of each unit of output is $10 and each worker hired must be paid $40 per day, how many workers should Ms. Smith hire?

Workers hired 0 1 2 3 4 5 6

Total product 0 12 22 30 36 40 42

NOTE: Ms. Smith should hire workers as long as their marginal revenue product (MRP) exceeds their marginal resource cost (MRC) and until MRP=MRC.

MRP=MR x MP = P x MP = $10 x MP (use information in the problem to calculate MP). MRC=wages=$40.

Answer:

Instructor Comments:

Salvatore 7: Problem 10

Points Possible

5

Points Attained

Question:

John Wilson, the owner of a fast-food restaurant, estimated that he can sell 1,000 additional hamburgers per day by renting more automated equipment at a cost of $100 per day. Alternatively, he estimated that he could sell an extra 1,200 hamburgers per day by keeping the restaurant open for two more hours per day at a cost of $50 per hour. Which of these two alternative ways of increasing output should Mr. Wilson use?

Answer:

Instructor Comments:

Salvatore 7: Problem 13

Points Possible

5

Points Attained

Question:

Indicate whether each of the following statements is true or false and give the reason. (a) A firm should stop expanding output after reaching diminishing returns and (b) if large and small firms operate in the same industry, we must have constant returns to scale.

Answer:

Instructor Comments:

CT3_Spreadsheet

Problem 3.xlsx

Sheet1

)^2

166.63 166.63

9

7

162.6

162.6

166.6

167.2

2.48

173.5

MSE

RMSE

Salvatore Chapter 6 Appendix Problem 3 (p.261)
	Time		CPI	forecast(w=0.3)		(		A-F	forecast(w=0.7)		(A-F)^2
	Jan-98		161.0
	Feb-98		161.1	164.94
	Mar-98		16	1.4	163.79
	Apr-98		161.8	163.07
	May-98		162.3					162.6
	Jun-98		162.2	16	2.5
	Jul-98		162.1	162.46
	Aug-98	162.35
	Sep-98	162.43
	Oct-98		163.2	16	2.48
	Nov-98		163.4	162.70
	Dec-98		163.5	162.91
	Jan-99		164.2	163.08
	Feb-99		164.6	163.42
	Mar-99		165.0	163.77
	Apr-99	164.14
	May-99		166.2	164.88
	Jun-99		165.4	165.28
	Jul-99		165.8	165.31
	Aug-99		166.3	165.46
	Sep-99					167.2	165.71
	Oct-99	166.16
	Nov-99		167.1	166.47
	Dec-99		167.3	166.66
	Jan-00		167.9	166.85	1.10		Light, Andrew Tsung-Hui (School of Business): Light, Andrew Tsung-Hui (School of Business): To be done by students
	Feb-00			169.3	167.17	4.55
	Mar-00		170.7	167.81	8.37
	Apr-00		170.6	168.67	3.71
	May-00		171.1	169.25	3.41
	Jun-00		171.0	169.81	1.42
	Jul-00		17	1.7	17	0.16	2.36
	Aug-00		172.2	170.63
	Sep-00		173.3	171.10	4.85
	Oct-00		173.8	171.76	4.17
	Nov-00					173.5	172.37	1.28
	Dec-00	172.71	0.62
3.19
1.79

Sheet2

Sheet3

Supporting

Calculations.xlsx

Sheet1

Sheet2

Sheet3

CT3_Spreadsheet

Problem 1.xlsx

Sheet1

Time CPI

A-F (A-F)^2

A-F (A-F)^2

Jan-98 161.0
Feb-98 161.1
Mar-98 161.4
Apr-98 161.8
May-98 162.3
Jun-98 162.2
Jul-98 162.1
Aug-98 162.6
Sep-98 162.6
Oct-98 163.2
Nov-98 163.4
Dec-98 163.5
Jan-99 164.2
Feb-99 164.6
Mar-99 165.0
Apr-99 166.6
May-99 166.2
Jun-99 165.4
Jul-99 165.8
Aug-99 166.3
Sep-99 167.2
Oct-99 167.2
Nov-99 167.1
Dec-99 167.3
Jan-00 167.9 167.2 0.7

9

Light, Andrew Tsung-Hui (School of Business): Light, Andrew Tsung-Hui (School of Business):
To be done by students Feb-00 169.3

Mar-00 170.7

2.5

Apr-00 170.6 169.3

May-00 171.1

1

Jun-00 171.0

0.2

Jul-00 171.7

0.8

Aug-00 172.2

0.9

Sep-00 173.3

1.7

Oct-00 173.8

1.4

Nov-00 173.5

0.4 0.16

Dec-00 173.5 173.5

MSE

RMSE

Salvator’s chapter 6 appendix problem 1 (p.260)
3-month MAF	6-month MAF
	0.4
167.4	1.9	3.48
168.2	6.42
1.3	1.69
17	0.2		0.9		0.8
170.8	0.04
170.9	0.64
171.3	0.87
171.6	2.78
172.4	1.96
173.1
-0.0	0.00
1.61
1.27

Sheet2

Sheet3