MGE Notes-answers Aug 30, 2017 .pdf

MGE Notes-answers Aug 30, 2017 .pdf - .‘ ~ yr H h...

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Unformatted text preview: - + .‘ ~ yr»\. H h 0“ " L 1. Fill in US blanks In the following table to answer the questions below. H 8 ' A1 —-g M f, ‘ :11- - g? A A Total Benefit Total Cost Net Benefit Marginal Mammal COSt Benefit ‘lflj '-_ - a. What is the optimal level of activity in the table above? b. What is the value of the net benefit at the optimal level of activity? Can the net benefit be increased by moving to any other level of A? .9 "Va? .p a- 3M5; N no ”3’ ’ 3t. N " Lo ,1 Now suppose a fixed cost of $24 is added to the process of the activity above. Fill in the blanks In the table below. (AC is the average cost per unit of activity). 4'" H U‘ 3 n u — (A m U1 5 ,, . l at (I) 5-. P O c. How does adding $24 of fixed costs affect total cost? Net benefit? d. How does adding $24 of fixed costs affect marginal cost? Did the optimal level of activity change? e. What level of activity minimizes average cost per unit? Is this the optimal level of activity? 2. An office manager is considering purchasing a new copy machine for tbcoffiu. Copy mam Brand A cost $2,500 and will produce about 500,000 copies before it wears out. Brand 6 W produce 600,000 copies and costs $4,000. Brand C will produce 580,000 copies and costs $2,618), How should the office manager rank the three copy machine bands in terms of value for a» amountof money spent? A R C. . (Cries 5.0,oo‘5 on06‘ ($0009 out» 1-509 «no a.” to" $>£ wo‘ b"__...."" I"... 3"“ Zoo 4,...” lro 1... 13,3 3. An azlmising executive wants a find the optimal level of two marketing acti ' v , which yield the expected total benefits presented in the table below. The cost of activity X is $400 a unit and the cost of activity Y is $1000 per unit. Total Total benefit of benefit of activity X Level of activity v, the optimal levels of each activity? What is the total benefit associated with the optimal level of X and Y? (D 6%.»: .4. x 400 3‘ o" ‘I- Q 2“ um‘i 9“ X 4’09 “Jo g 0" . :‘ ‘* \. v 3" X 4.09 0 ‘3‘. V«\* ." \I [090 ...
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