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.‘ ~ 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
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3M5; N
no
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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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- Spring '08
- ISSE