Answer to Question #86866 in Microeconomics for shum

Question

A firm rents light bulbs to consumers. The firm covers the cost of the light bulb and replacing it every time it burns out. The interest rate is 18%. The cost of producing a light bulb is √N where N is the number of years the light bulb lasts.

In the following cases, what is the firm's present value cost of providing a lightbulb to a consumer and replacing it everytime it burns out forever?

(a)Using light bulbs that last 1 year ?
(b)Using light bulbs that last 2 years ?
(c)Using light bulbs that last 10 years ?

Answer 1

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