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A company can purchase a piece of equipment for Rs 4,000,000 and sell it for Rs 800,000 at the end of 6-year service life, or it can lease the unit for the same period by making a first of the year payment of Rs 600,000. Compare the equivalent annual costs of the alternatives, using an interest rate of 15 percent.
Suppose that the price of an ice cream cone increases from PRs. 60 to PRs. 80 and the amount you buy falls from 12 to 8 cones.
Requirements:
a. Calculate price elasticity of demand in Percentage
b. Interpret the answer
c. What type of elasticity is this i.e. perfectly elastic, perfectly inelastic, unitary elastic,
relatively elastic or relatively inelastic.
What are the methods further to take to price floor successfully implement in the market?
(1). Consider the market for ponche, a alcoholic wine. the demand is characterized by the following equation. Pd = 100-Qd the supply is given by Ps = 0.25Qs
I). determine the equilibrium quantity and price
Sales are the function of advertising in The Dawn and Diva Magazine (X, Y).
S = XY2
If the price of advertising in The Dawn and Diva Magazine is Rs.5 and Rs.10 respectively. The total budget for advertising is Rs.105. For maximizing the sales of Dawn and Diva Magazine find out the best combination of advertisement in newspapers and magazines by using Lagrangian multiplier
Developing countries are badly affected by environment please suggest how developed countries can help them to lower the gravity of this situation
AVAC is the only pharmaceutical firm producing a Vaccine.
The Demand Curve for its product is Qd = 250 – 50 P
where P is Price and Q are packs of vaccines in ‘000
Total Cost Function estimated by the firm is TC = 15 + 0.5Q
where Q is monthly output.
a. What is the market structure of AVAC? State its characteristics. (1 Mark)
b. To maximize profit, (2 Marks)
(i) What will be the optimum price and how many packs of Vaccine should the firm produce and sell per month?
(ii) If this number of packs is produced and sold, what will be the firm’s monthly profit?
c. Using available information, draw AVAC’s demand, marginal revenue and marginal cost curves in a graph and clearly label thefirm’s profit maximizing price, quantity and profit. Do you observe any welfare loss? If so, also indicate and label the area on the graph.(2 Marks)
d. Assume all other pharmaceutical firms in the market start producing the Vaccine and the market becomes competitive. What will be the impact on price and marginal revenue?Would the market structure of the firm remain the same? Support your answer with help of the firm’s graph.(2 Marks)
AVAC is the only pharmaceutical firm producing a Vaccine.
The Demand Curve for its product is Qd = 250 – 50 P
where P is Price and Q are packs of vaccines in ‘000
Total Cost Function estimated by the firm is TC = 15 + 0.5Q
where Q is monthly output.
a. What is the market structure of AVAC? State its characteristics.
b. To maximize profit,
(i) What will be the optimum price and how many packs of Vaccine should the firm produce and sell per month?
(ii) If this number of packs is produced and sold, what will be the firm’s monthly profit?
c. Using available information, draw AVAC’s demand, marginal revenue and marginal cost curves in a graph and clearly label thefirm’s profit maximizing price, quantity and profit. Do you observe any welfare loss? If so, also indicate and label the area on the graph.
d. Assume all other pharmaceutical firms in the market start producing the Vaccine and the market becomes competitive. What will be the impact on price and marginal revenue?Would the market structure of the firm remain the same? Support your answer with help of the firm’s graph.
You have been hired by Kia as manager for its Pakistan operations. Assume following is the short-run production function at their assembly plant outside Karachi:
Q = 10L2 – 0.5 L3 where L is variable input labor, Q is output of Cars assembled
a. Find the ranges of the three stages of production.
b. Demonstrate the relationship between Total Production, Marginal Product and AverageProduct in a hypothetical graph and clearly label the three stages as per the values of Lyou observed in (a) above
c. At the end of the year it is expected that output will double with purchase ofnew equipment and machinery. The production function is estimated to be
Q = 60L.30K.70 where L is labor and K is capital.
Suppose initial L1 = 1 and K1 = 1. When inputs are in increased to L2 = 2 and K2 = 2,
do you observe increasing, decreasing or constant returns to scale?
d. Assume Kia Head Office is considering hiring more laborers either at their Gwadarplant or alternatively at the Karachi plant. What will be your advice if workers’ marginal product is 40 at wage of Rs=5/hour in Karachi and marginal product is 28 at wage of Rs=4/hour in Gawdar?
Prove that TU=∑MU and MU =ΔTU/ΔQ
