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For each of the following cost-output relationships, describe the shape (U-shape,
decreasing, increasing, constant) of the average total cost and marginal cost
functions (C = total cost, Q = output):
(a) C = 42,500,000 + 2550Q
(b) C = 8.48 + 0.65Q + .00220Q2
a) Calculate the TP, MP Labor , MPCapital APLabor, AAPcapita and the MRTS .
b) Within what ranges do we see increasing returns, decreasing returns and negative returns?
C. Within what range does the DMRTS happens
Labor Capital
10 200
15 500
20 800
30 1200
40 1500
50 1800
60 2000
70 2300
80 2500
90 2800
You have just been hired a consultant to help a firm to decide which of the three option to take to maximize the value of the firm over the next three years. The following table shows year end profits for each option. Interest rate are expected to be stable at 8 percent over the next three years.
Option A:
Year 1 year 2 year 3
$70,000 $80,000 $90,000
Option B:
Year 1 Year 2 year 3
$50,000 $90,000 $100,000
Option C:
Year 1 year 2 year 3
$30,000 $100,000 $115,000
a. Discuss the difference in the profits associated with each option
b. Which option has the greatest present value? Show computation
You are the manager of a fortune 500 hotel chain and must decide where to locate a new hotel. Based on tax considerations,your accounting department suggests that atlantic city is the best choice followed by las vegas. In particular your current year tax savings from locating in atlantic city are $4 million,but they are only $3 million in las vegas. Your marketing department, on the other hand has provided you with sales estimates that suggest that the present value of the gross (of taxes) operating profits from locating in atlantic vity are only $10 million but they are $14 million for las vegas. It will cost $14 million to build the hotel in either location. Ignoring all other considerations, where should you build the hotel? What are your firm's economic profits if you locate the hotel in atlantic city?
If the price of Pak Suzuki company Alto car decreases from Rs 1,700,000 to Rs 1,200,000, keeping other factors constant, it would be termed as movement along the demand curve or shift in the demand curve? Elaborate it graphically?
Eva is risk averse. Currently she has $50,000 to invest. She faces the following
choice: she can invest in the stock of a dotcom company, or she can invest in IBM stock. If she
invests in the dot com company, then with probability 0.5 she will lose $30,000, but with
probability 0.5 she will gain $50,000. If she invests in IBM stock, then with probability 0.5 she
will lose only $10,000, but with probability 0.5 she will gain only $30,000. Can you tell w hich
investment she will prefer to make?
What happens to the equilibrium price and quantity, when demand and supply both changes in equal proportion? (Increase, decrease or constant/uncertain)
An individual firm supply curve for the quantity of Beer supplied in litter per- hour is given by Qs = 60P - 48. There are 5 firms in the Beers industry and the price of Beer is 40 Birr per-litter. Find; A) the quantity of Beer supplied by an individual firm per- hour. B) The quantity of Beer supplied by the industry per- hour
You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. What is the true cost of going skiing? Now suppose you had been planning to spend the day studying at the library. What is the cost of going skiing in this case? Explain
According to what you've learned about the price elasticity of demand, do you think that education in community colleges has an elastic or inelastic demand? Why? Explain your answer
