Economics Answers

What is utility?

The ABC Computer Corporation is considering an increase in its annual advertising expenditures from $10 Million to $15 Million for a five year period. (i-e in years 1 to 5). The marketing department estimates that the increased advertising will increase profits by $4 Million in years 3 to 7 and by $3 Million in years 8 to 10, after which profits will return to the level they were at prior to the new program. If the firm use a discount rate of 10 percent, will the proposed advertising program increase shareholder's value?

For the production function Q=20K^0.5 L^0.5, determine four combination of capital and labor that will produce 100 and 200 units of output. Plot these points on a graph and use them to sketch the 100 and 200 unit isoquants.

Suzuki Motors has one fixed input, the long-term lease on its factory building for which the rent is $5,000 per production period. Use the data shown here to determine Average Cost, Average Variable Cost and Marginal Cost for each output rate shown.
Q 1 2 3 4 5
TVC $1,000 $2,000 $3,000 $4,000 $5,000

Project the sale for the next eight years:
Years: 1965 1966 1967 1968 1969 1970 1971
Sales in dollars: $120 $140 $120 $150 $170 $190 $210

Draw the graph and interpret the future conditions

Muslim Glass Company faces the following demand and marginal revenue functions:
P=1000-0.5Q, MR=1000-Q
P is the price, Q is quantity and MR is the Marginal Revenue.
a) At what quantity is total revenue maximized? what is the price elasticity of demand at this quantity?
b) The firm has been selling 1000 units per period at a price of $500. What is the price elasticity of demand at t his quantity?
c) At what price would Muslim sell no output? What quantity would be demanded if the product were given away?

Given the total cost function
TC=1000+10Q-0.9Q^2+0.04Q^3
Find the rate of output those results in minimum average variable cost.

An executive’s employment contract calls for salary of $400,000 per year, a bonus equals to 2 percent of profits in excess of $10,000,000, and an option to buy 5,000 shares of common stock at a price of $50 per share. The market price of the stock is $70 per share and the firm’s profits for the current year are $12,000,000. Assuming the executive exercise the stock option and then sells the stock, what is the total compensation for the year?

Use the production function Q = 25K^0.5L^0.5 to derive a number of input combinations on the 100-unit isoquant. Then, plot these points in a graph.

An executive, who just turned forty five years of age, is considering two jobs offers. The first would pay $250,000 at the end of next three years. The second would pay $100,000 at the end of next five years plus retirement account would be set up that would pay a bonus of $3,000,000 on the executive’s sixty-fifth birthday. The interest rate is 12 percent. If money is only considering which offer should be accepted?