Finance Answers

79. Why should goods produced in fixed proportions be regarded as a product package in developing production and pricing strategies?

70. How is the dead weight loss from monopoly affected by the slope of the demand curve?

61. Given the production function
Q = 30 K0.7 L0.5
and input prices r = 20 and w = 30, determine the expansion path.

52. The marginal product of labor function for Central Milling Inc. is given by the equation
MPL = 10 (K/L) 0. 5
Currently, the firm is using 100 units of capital and 121 units of labor. Given the very specialized nature of the capital equipment, it takes six to nine months to increase the capital stock, but the rate of labor input can be varied daily. If the price of labor is $10 per unit and the price of output is $2 per unit, is the firm operating efficiently in the short run? If not, explain why, and determine the optimal rate of labor input.

43. Assume that the budget constraint is given by the equation Q1 = 1,000 – 5Q2, where Q1 and Q2 represent quantities of two goods. Normally, indifference curves are convex to the origin, but assume in this case that they are linear with a constant slope of –2.
i) Graph the budget constraint (with Q1 on the vertical axis).
ii) Draw in a set of indifference curves and label the utility-maximizing point.
iii) Where would the utility-maximizing point have been if the indifference curves had a constant slope of –6?

34. Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is – 3.0. Currently, boards are priced at $500 and the quantity demanded is 10,000 per year.
(a) If the price is increased to $600, how many sailboards will the company be able to sell each year?
(b) How much will total revenue change as a result of the price increase?

25. What do you understand by demand function? Explain
Linear demand function
Non-linear demand function
Shift in demand curve

16. Explain the relationship among the total, average and marginal functions in the most generalized way. Intuitively explain why any intersection of the average and marginal function will occur at a maximum or a minimum point on the average function.

7. Tempo Electronics, Inc., has an inventory of 5,000 unique electronic chip originally purchased at $2.50 each; their market value is now $ 5 each. The production department has proposed to use these by putting each one together with $6 worth of labor and other materials to produce a wristwatch that would be sold for $10. Should that proposal be implemented? Explain from the viewpoints of economic profit and opportunity costs.

an organisation has credit period of 1 month and wishes to extend it to two months.The organisation expects increase in sales of 10% by revising the credit policy from 1 to 2 months.The organization also expects an increment rate of return of 30%