Suppose that Lucy's quasilinear utility function is U-2(01)05 +92' with p₁ =$2 and p2 = $2 initially and p₁ increasing from $2 to $4. Compare her compensating variation (CV), equivalent variation (EV), and change in consumer surplus (ACS). Lucy's compensating variation (CV) is $ (Enter your response rounded to two decimal places and include a minus sign if necessary.)

Dilberts Department Store is trying to determine how many Hanson T-shirts to order. Currently the shirts are sold for 21, but at later dates the shirts will be offered at a 10% discount, then a 20% discount, then a 40% discount, then a 50% discount, and finally a 60% discount. Demand at the full price of 21 is believed to be normally distributed with mean 1800 and standard deviation 360. Demand at various discounts is assumed to be a multiple of full-price demand. These multiples, for discounts of 10%, 20%, 40%, 50%, and 60% are, respectively, 0.4, 0.7, 1.1, 2, and 50. For example, if full-price demand is 2500, then at a 10% discount customers would be willing to buy 1000 T-shirts. The unit cost of purchasing T-shirts depends on the number of T-shirts ordered, as shown in the file P10_36.xlsx. Use simulation to determine how many T-shirts the company should order. Model the problem so that the company first orders some quantity of T-shirts, then discounts deeper and deeper, as necessary, to sell all of the shirts.

The Baker Company wants to develop a budget to predict how overhead costs vary with activity levels. Management is trying to decide whether direct labor hours (DLH) or units produced is the better measure of activity for the firm. Monthly data for the preceding 24 months appear in the file P13_40.xlsx. Use regression analysis to determine which measure, DLH or Units (or both), should be used for the budget. How would the regression equation be used to obtain the budget for the firms overhead costs?

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