Economics of Enterprise Answers

Question 1
Two individuals are involve in a collective business, each year Mr.A received 60 % of the profit while B
receive 35% of remaining. The leftover profit is allocate for charity. The annual revenue of the business
is $500,000 while the operating cost is $-175000 for inputs (including labor and capital), $-70,000 for rent,
and 15% of rent as utilities. By profession Mr. A is an engineer and can earn $7,000 per month by working
in automobile industry. Similarly, Mr.B can earn $5000 per annum by working in a nearby school. Assuming
Zero income and sale tax, answer following questions.
a) What would be business and economic profit of Mr. A?
b) Which shareholder is economically well-off and Why?
c) What would be their total revenue in 15 years if the growth rate of the business is 2.3% per
annum?
Question 2
The total business value of KFC in 1990 was $ 106,940. The management is expecting growth of 1.3 percent.
How long KFC business would take to reach at $154,287 worth

b) Suppose you decide to produce a beverage and you discover it has a demand function given by

a) Assuming you are a manager of a beverage manufacturing company and you are operating in a non-competitive market were your firms total cost of production is zero. Indicate what you as the manager must do (cut or raise production) to raise revenue when ;
I. Price elasticity of demand is elastic
II. Price elasticity of demand is inelastic
III. Price elasticity of demand is unit elastic
b) Suppose you decide to produce a drink and you discover it has a demand function given by

Consider a market with two dominant firms (curnot duopoly) producing a homogenous product. The inverse market demand function is given by

you assume that Coca-Cola company is the representative firm & has a total cost given by TC= 125+q2+q where q is the quantity of the output that the firm produces. You further assume that the market demand for Coca-Cola products is given by the equation P= 1250.5-2Q, where Q is the entire market quantity. In addition, you are informed that the supply curve for the market is given by P=150+Q.

d) In this market, what is the long run equilibrium price and what is the long run equilibrium quantity for Coca-Cola Company to produce? Explain your answer.
e) Given the long run equilibrium price calculated in part (d) above, how many units of the coca-cola products are produced in this market?

you assume that Coca-Cola company is the representative firm & has a total cost given by TC= 125+q2+q where q is the quantity of the output that the firm produces. You further assume that the market demand for Coca-Cola products is given by the equation P= 1250.5-2Q, where Q is the entire market quantity. In addition, you are informed that the supply curve for the market is given by P=150+Q.
a) What is the equilibrium quantity and price in this market given this information?
b) Given the answer in part (a) above, obtain the profit maximizing level of output, the total revenue, total cost and profit at the market equilibrium.
Is this a short run or long run equilibrium? Explain your answer.
c) Given your answer in (b) above, what do u think will happen in this market in the long run?

if wages increase mor than the productivity of workers increase, we would expect?

Does a high percentage of GDP from agriculture make a country more or less productive

P=$250-$0.15Q, TC=$25000+$10Q(The TC function does not include the firm's cost of capital)
a. In a unregulated enviroment, what price would this firm change, what output would be produced, what would total profits be, and what rate of return would the firm earn on its asset base?

Supporters of free trade zones would most likely argue that this map demonstrates how free trade