Maymester%202010%20-%20MIDTERM%20-%20BLUE

# Maymester%202010%20-%20MIDTERM%20-%20BLUE - Units of X 20...

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|-46,456.00/24,232.10| < 2 0.88 – 2(0.20) < β4 < 0.88 + 2(0.20) QX = - 46,456 – 282.5(200) – 104.4(100) + 1.43(50,000) +0.88(100,000) = 46,104 EQX,PY=∆QX∆PY×PYQX=-104.4×10046,104=-0.23 24 – 8 = 16 hours of leisure. His MRS = - ½ (288/16) = - \$9 per hour of leisure. The overtime offer pays him, at the margin, \$36/hour to reduce his leisu t, you will employ 20 units of capital and 40 units of labor to minimize costs. Per Unit Cost = (wL + rK)/Q = [100(40) + 50(20)]/1000 = 5.00 PV= 1+0.080.08-0.0610= 540 ∆Revenue= 100,0001+-1.12+120,000-0.05-0.04=720 The price must be greater than minimum AVC, which we have where AVC(Q) = MC(Q) or 3,000 -50Q +(1/2)Q2 = 3,000 – 100Q + (3/2)Q2 Q2 – 50Q = 0 Q = 50 Minimum AVC = 3,000 – 50(50) + (1/2)(50)2 = 1,750 Acme maximizes profit where MC(Q) = MR = P, or 3,000 -100Q + (3/2)Q2 = 6,150 (3/2)Q2 – 100Q – 3,150 = 0 Q= -(-100)±-1002-4(32)-3,1502(32)=100±28,9003=100±1703=-23.33;90 Acme is earning an negative economic profit (but is covering its variable costs): Profit = 6,150(90) – (500,000 + 3,000(90) – 50(90)2 + (1/2)(90)3) = 553,500 – 729,500 = - 176,000 We would expect firms to exit this industry, decreasing the supply and raising the market price. 2800 9 18 20 AVC ATC MC \$ Q TFC = AFC Q = (20 – 9)2,800 = 30,800 = 80K K = 30,800/80 = 385 TVC = TC - TFC = 18(3,600) – 30,800 = 34,000 = 200L L = 34,000/200 = 170 MC = w/MPL MPL = w/MC = 200/18 = 11.11 |MRTS| = MPL/MPK = 11.11/6.25 = 1.78 < 2.50 = 200/80 = w/r 20 15 10 5 0 5 10 20 15 P S D EQ,P = ( Q/ P)(P/Q) = (-1)(8/12) = - 0.67 CS = ½ (10)(5) = 25 PSNew = ½ (6)(3) = 9 PS = 9 – 25 = - 16 - CS = 6(2) – ½ (4)(4) = 12 – 8 = + 4 - CS + PS = 4 - 15 = - 12 Wage 200 Supply 150 100 50 Demand 200 150 100 50 Labor VMP = P MPL MPL = VMP/P = 110/5.5 = 20 Profit = Revenue net of labor costs – Fixed Costs = ½ (180)(90) – 7,500 = 8,100 – 7,500 = 600 rofit = Revenue net of labor costs – Fixed Costs = ½ (120)(120) – 7,500 = 7,200 – 7,500 = - 300 Price=10,0001+0.00222=9,989.01 1+0.0391201+ie10=1+0.040730 ie=101.0407301.039120-1=0.0439 or 4.39 percent 0 – (1/5)Q. Thus its marginal revenue function is MR = 100 – (2/5)Q. XYZ maximizes revenue if 0 – (1/5)Q. Thus its marginal revenue function is MR = 100 – (2/5)Q. XYZ maximizes profits if C4 = 0.243 + 0.231 + 0.179 + 0.151 = 0.804 .1122 + 0.2312 + 0.2432 + 0.0842 + 0.1792 + 0.1512) = 1869 - HHI = 10,000 2 0.179 0.151 = 541 we have Q1 = 30 and Q2 = 45. Total output Q = 30 + 45 = 75. The price we will charge: 90(30) + (30)2 = 7600 + 60(45) + (45)2 = 9725 Units of X 10 5 0 5 10 Units of Y 15 15 RS = -PX/PY = -15/5 = -3 You believe the demand for your product, product X, is determined by the price you charge, P X , the price of another good Y, P Y , average household income in your market, I, and your advertising budget, A. Furthermore, you believe demand for your product is linear:

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Maymester%202010%20-%20MIDTERM%20-%20BLUE - Units of X 20...

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