You are watching: An economist estimated that the cost function of a single-product firm is:
a. Answer is 90 asb. Replace Q v 10. 90+35(10)+25(10)^2+10(10)^3-90 = 12,850c. Variable cost - solved cost, or 12,850-90 = 12,760d. Fixed price / quantity, or 90/10 = 9e. Variable expense / quantity, or 12,850/10 = 1285f. Typical fixed expense + median variable cost, or 1285+9 = 1294g. Take part of the original equation, take the power number and multiply by the number that effects, then mitigate the power number through 1. 35Q + 25Q^2 + 10Q^3 becomes35 + 50Q + 30Q^2. Since Q = 10, settle for answer: 3535
A manager rental labor and rents funding equipment in a really competitive market. Right now the wage rate is $8 per hour and also capital is rented in ~ $12 per hour. If the marginal product of labor is 60 systems of output per hour and also the marginal product of resources is 50 systems of output per hour, need to the for sure increase, decrease, or leave the same the quantity of capital used in its manufacturing process?
A firm"s product sells for $4 per unit in a very competitive market. The for sure produces output using funding (which it leas at $25 per hour) and labor (which is paid a fairy of $30 every hour under a contract for 20 hours of job services). Finish the adhering to table and use that info to answer the concerns that follow.
Working notes:(1) MPK = change in output (Q) / adjust in K(2) APK = Q / K and also APL = Q / L(3) VMPK = MPK x Price = 4 x MPK(4) complete cost = wL + rKWhen Q = 0, TC = Fixed cost (FC)So, FC = 20 x $30 = $600(5) benefit = (P x Q) - TC = 4Q - (wL + rK) = 4Q - 600 - 25K
A firm have the right to manufacture a product follow to the production function:Q = F(K,L) = K^3/4 L^1/4.a. Calculate the mean product that labor, APL, as soon as the level of capital is fixed at 81 units and also the firm uses 16 devices of labor.b. Discover an expression for the marginal product the labor, MPL, once the lot of capital is resolved at 81 units.Then, show that the marginal product the labor relies on the lot of job hired through calculating the marginal product of job for 16 and 81 units of labor.c. Suppose funding is solved at 81 units. If the firm can sell its calculation at a price the $200 per unit and can hire labor at $50 every unit, how plenty of units of labor should the firm rental in order come maximize profits?
a) once K = 81 &(1) together = 16.Q = (81)3/4 x (16)1/4 = 27 x 2 = 54APL = Q / together = 54 / 16 = 3.375(ii) l = 256Q = (81)3/4 x (256)1/4 = 27 x 4 = 108APL = Q / l = 108 / 256 = 0.422(b) MPL = dQ / dL = (1/4) x K3/4L-3/4(i) when K = 81, MPL = (1/4) x (81)3/4L-3/4 = (1/4) x 3 x L-3/4 = 0.75 x L-3/4(ii)When together = 16, MPL = 0.75 x (1/8) = 0.0938When l = 81, MPL = 0.75 x (1/27) = 0.028As l increases, MPL decreases. So MPL counts on L.(c)Firm should hire job upto that suggest where Price x MPL = fairy rateWhen K = 81, MPL = 0.75 x L-3/4$200 x 0.75 x L-3/4 = $50L3/4 = 3Raising every side to (4/3)rd power,L = 4
The world of Videos operates a retail store that leas movie videos. For each that the last 10 years, people of Videos has consistently earned profits exceeding $36,000 every year. The store is located on prime actual estate in a college town. Civilization of Videos pays $2,300 per month in rent for its building, yet it provides only 50 percent the the square footage rented for video rental purposes. The other part of rented space is essentially vacant. Noticing that civilization of Videos only occupies a part of the building, a real estate certified dealer told the owner of world of Videos that she could include $1,650 every month to her firm"s profits by renting the end the unused portion of the store. When the prospect of adding an additional $1,650 to human being of Videos"s bottom line was enticing, the owner was also contemplating making use of the additional space to rent video clip games. What is the opportunity expense of utilizing the unused part of the structure for video game rentals?
You were freshly hired to change the manager that the Roller department at a significant conveyor-manufacturing firm, in spite of the manager"s strong external sales record. Roller production is fairly simple, requiring just labor and a device that cuts and crimps rollers. Together you begin reviewing the company"s production information, you learn that labor is payment $13 every hour and also the last worker hired produced 100 rollers per hour. The firm rents roller cutters and also crimping devices for $16 per hour, and the marginal product of capital is 120 rollers every hour.Should you change the mix of capital and also labor, and also if so, how should the change?
L = 100/13 = 7.69 > funding = 120/16 = 7.5Since labor exceeds capital, girlfriend should increase labor and also decrease capital.
Suppose the marginal advantage of composing a contract is $100, live independence of that length. Discover the optimal contract size when the marginal price of creating a contract of length L is:a. MC(L) = 35 + 5L.b. MC(L) = 55 + 3L.
Identify whether each of the following transactions requires spot exchange, contract, or upright integration.a. Barnacle, Inc., has a legal obligation to purchase 2 tons of structural steel per week come manufacture conveyor frames.b. Exxon-Mobil provides the oil extracted from that is wells to produce raw polypropylene, a type of plastic.c. Watercraft Lifts R us purchases share AC electric motors from a local distributor.d. Kaspar Construction—a home-building contractor—purchases 50 pounds of pond from the local residence Depot.
Refer to the figure below. Intend that the marginal advantage of creating a contract is $100 and also the marginal cost of the contract is $50. Based on this information, the optimal contract size should:
Be increasedWhen cost is much less than benefit, increase contract length. When price is the same as benefit, contract length should be constant. When price is an ext than benefit, contract must be decreased
Describe how a manager who derives satisfaction indigenous both income and shirking allocates a 10-hour day between these tasks when payment an annual, fixed salary of $120,000.When this same manager is given an annual, solved salary of $120,000 and 3 percent the the firm"s profits—amounting come a full salary of $155,000 per year—the manager chooses to occupational 8 hours and shirks for 2 hours. Offered this information, i beg your pardon of the compensation schemes go the manager prefer?
Time working: 0 hoursTime shirking: 10 hoursThe plan with resolved payment the $120,000 and also a percent of profits.
Recently, the owner that a businessman Joe"s franchise decided to change how she compensated her height manager. Last year, she payment him a resolved salary that $55,000 and also her save made $120,000 in revenues (not counting payment come her height manager). She doubt the store might do much better and feared the resolved salary was resulting in her height manager come shirk top top the job. Therefore, this year she determined to offer him a fixed salary of $28,000 plus 15% of the store"s profits. Due to the fact that the change, the save is performing lot better, and she forecasts profits this year to be $260,000 (again, not counting the payment to her peak manager). Suspect the readjust in compensation is the reason for the raised profits, and also that the projection is accurate, how much much more money will the owner make (net that payment come her optimal manager) thus change?Does the manager make more money under the new payment scheme?
0.15*260,000 = 39,00039,000+28,000 = 67,000260,000-67,000 = 193,000120,000-55,000 = 65,000193,000-65,000 = 128,000 = price 1Yes = prize 2. 67,000>55,000
The manager of your company"s pension money is compensated based entirely on money performance; he earned over $1.2 million last year. Together a result, the fund is contemplating a proposal to cap the compensation of fund managers in ~ $100,000. I m sorry of the adhering to is a likely consequence of this proposed change in compensation?
The fund manager will have actually lower incentives come maximize the value of the fund, resulting in a lower return for the participants.
Jim"s diner is just about to open up in Memphis, Tennessee. However, Jim is make the efforts to decide whether he wants to market Coke or Pepsi soda products. He determines that, to sell either product, he will need to spend $1,800 in sunk prices to purchase and install the appropriate paraphernalia, e.g., a big Coca-Cola or Pepsi authorize out front. Ultimately, he chooses to offer Coke products and agrees to salary Coke 5 cents per oz of Coke sold for the best to use its product. ~ Jim renders the investments details to his soda choice, Coke returns and asks because that a fixed (one-time) fee in enhancement to the 5 cents per ounce. What is the most Jim have to be ready to pay?
Ten firms compete in a industry to offer product X. The full sales of all firms offering the product room $2,500,000. Ranking the firms" sales from highest to lowest, we discover the top four firms" sales to it is in $415,000, $350,000, $280,000, and also $195,000, respectively. Calculate the four-firm concentration proportion in the market for product X.
Total Sales=$2500000Market re-publishing 1= 415000/2500000 = 17%Market re-publishing 2= 350000/2500000 = 14%Market share 3= 280000/2500000 = 11%Market re-superstructure 4= 195000/2500000 = 8%Four certain Concentartion Ratio=.17+.14+.11+.08=.50=50%
An industry consists of 3 firms v sales the $250,000, $825,000, and $315,000.a. Calculation the Herfindahl-Hirschman table of contents (HHI).b. Calculate the four-firm concentration proportion (C4).c. Based upon the FTC and also DOJ Horizontal merger Guidelines described in the text, is the department of Justice likely to effort to block a horizontal merger in between two firms with sales the $250,000 and $315,000?
a. First, amount of the three sales = 1,390,000HHI = 10,000<(250,000/1,390,000)^2 + (825,000/1,390,000)^2 + (315,000/1,390,000)^2> = 4360 rounded upb. Sum of the sales / sale total, or 1,390,000/1,390,000 = 1c. 250,000 + 315,000 = 565,00010,000<(250,000/565,000)^2 + (315,000/565,000)^2>= 312,789 This is much more than 100-200 difference, therefore it will certainly be challenged.
The industry elasticity of need for tools is −2, when the elasticity of need for one individual tool manufacturer"s product is −10. Based upon the Rothschild strategy to measuring industry power, we conclude that:
In this problem, elasticity the firm and also industry room -2. So table of contents is 1. It shows presence of sufficient degree of syndicate power in the market.
A firm has actually $1,600,000 in sales, a Lerner table of contents of 0.55, and a marginal cost of $45, and also competes versus 1000 various other firms in its relevant market.a. What price does this firm fee its customers?b. Through what variable does this firm note up that is price over marginal cost?
(a) expect Fiat recently entered into an Agreement and Plan of merger with instance for $4.3 billion. Prior to the merger, the sector for four-wheel-drive tractors included five firms. The sector was very concentrated, with a Herfindahl-Hirschman table of contents of 2,685. Case"s re-superstructure of that industry was 9 percent, if Fiat made up just 5 percent the the market. If approved, by just how much would certainly the postmerger Herfindahl-Hirschman index increase?(b) Based only on this information, is the justice Department likely to an obstacle the merger according to the Horizontal merger Guidelines?
a. 210,0000.09*0.05 = 9090+2685 = 2775b. Possibly as result of 2775 being over 2500 article merger, but the quantity of the index increase is just 90, which is below the 100-200 lot in i beg your pardon a challenge typically take away place
(a) numerous years ago, Pfizer and Warner-Lambert agreed to a $90 exchange rate merger, thus creating one the the world"s largest pharmaceutical companies. Pharmaceutical suppliers tend to invest a higher percentage the sales on R&D activities than other industries. The government urges these R&D tasks by granting companies patents because that drugs authorized by the Food and Drug Administration. Because that instance, Pfizer-Warner-Lambert spent big sums of money occurring its popular cholesterol-lowering drug, Lipitor, i beg your pardon is right now protected under a patent. Lipitor sells for around $3 every pill. Calculate the Lerner table of contents if the marginal expense of creating Lipitor is $0.30 every pill.(b) does the Lerner table of contents make feeling in this situation?
PART-1Solution: 0.9Explanation: The Lerner index is l = (P - MC) / p = ($3 - $0.30) / $3 = 0.9PART-2Solution: Yes, Lipitor has actually a patent-protected monopolyExplanation: The Lerner index is 0.9, which shows the certain has substantial market power. This renders sense because the product that the firm sells is right now under patent protection, which essentially makes the certain a legit monopoly.
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In the 1990s five firms supplied amateur color film in the united States: Kodak, Fuji, Konica, Agfa, and also 3M. Indigenous a technological viewpoint, over there was tiny difference in the high quality of shade film created by these firms, however Kodak"s industry share was 67 percent. The very own price elasticity of demand for Kodak film was - 2.0 and the market elasticity of need was - 1.75. Intend that in the 1990s, the mean retail price of a role of Kodak film was $6.95 and also that Kodak"s marginal expense was $3.475 every roll. Based upon this information, calculate the Rothschild index and Kodak"s Lerner index.Which kind of market structure finest describes the film sector in the 1990s?
The manager that a local monopoly estimates that the elasticity of demand for its product is consistent and equal to -3. The firm"s marginal cost is constant at $25 per unit.a. Refer the firm"s marginal revenue together a function of its price.b. Identify the profit-maximizing price.
The CEO that a significant automaker overheard among its division managers do the adhering to statement concerning the firm"s production plans: "In order to maximize profits, it is necessary that we run at the minimum allude of our average total cost curve." If you were the CEO that the automaker, would certainly you worship or chastise the manager?
A for sure sells its product in a perfect competitive market where other firms fee a price that $120 per unit. The firm"s total costs are C(Q) = 60 + 8Q + 2Q2.a. Exactly how much output must the firm create in the short run?b. What price should the firm charge in the quick run?c. What room the firm"s short-run profits?d. What adjustments need to be guess in the long run?
a. How much output have to the firm produce in the quick run?Where MC = Price.MC = 8 + 4Q = 1204Q = 120 - 8 = 112Q = 112/4 = 28b. What price need to the firm fee in the quick run?Prices are offered as $120 (all firms have actually the exact same price)c. What room the firm"s short-run profits?Profit = total Revenue - full CostProfit = Price * quantity - TCProfit = 120*28 - (60 + 8(28) + 2(28)(28))Profit = 3360 - (60 + 224 + 1568)Profit = 3360 - 1852 = 1508d. What adjustments should be suspect in the long run?In lengthy run, entry will take place until financial profits shrink to zero
The elasticity of need for a firm"s product is -2.5 and also its declaring elasticity of demand is 0.25. A. Determine the firm"s optimal advertising-to-sales ratio.b. If the firm"s revenues are $60,000, what is that profit-maximizing level the advertising?
You space the manager of a small pharmaceutical agency that received a patent top top a new drug three years ago. Despite strong sales ($175 million last year) and a low marginal price of developing the product ($0.75 per pill), your agency has however to show a benefit from selling the drug. This is, in part, due to the reality that the firm spent $1.8 billion occurring the drug and also obtaining FDA approval. An economist has approximated that, in ~ the current price the $1.75 every pill, the own price elasticity of demand for the drug is -3. Based upon this information, what can you perform to an increase profits?
Principles of Macroeconomics5th EditionBen Bernanke, Robert Frank
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