ected Marginal Revenue will be:
)Q
C, or 200 – (4/5)Q = 120.
Q will equal (5/4)(200 – 120) or 100.
The cost of producing 100 units will be 3000 + 120(100), which equals 15,
evenue will equal 100(100) or 10,000.
Profit will be 10,000 – 15,000 = 5,000.
Total revenue will equal 175(100) or 17,500.
Profit will be 17,500 – 15,000 = 2,500.
0 + 2,000 = 1,000.
The variance of future profits will equal (1/5)(5,000  1,000)2 + (4/5)(2,500 – 1,000)2 = 9,000,000.
The standard deviat
G
1
1
2
2
1
1
1
2
(150, 210)
(160, 200)
2
(200, 220)
(230, 170)
2
(200, 240)
(150, 220)
2
(150, 150)
(180, 100)
E
H
G
C
F
H
G
D
E
H
A
G
F
H
G
E
H
B
G
C
F
H
G
D
E
H
G
F
H
al Bid = 50,000 – (50,000 – 20,000)/5 = 44,000.
ed Gain = {(44,00020,000)/(60,000 – 20,000)}4(50,000 – 44,000) = 777.60
Optimal Bid = 800 – (800 – 200)/20 = 770
gh = 60 + 60/i = 185 + 50/i = PVLow for i = 10/125 = 0.08 or 8 percent.
nal revenue MR(Q) = 800 – 20Q.
Here output Q = QA + QB.
To maximize profits:
A = MC(QA)
or
2QA + QB =40
B = MC(QB)
or
QA + (3/2)QB = 40
= QA + QB = 10 + 20 = 30.
The profit maximizing price P(30) = 800 – 10(30) = 500.
Profits earned by the firm will be:
4,000 + 10 È 102) – (2,000 + 5
202)
[1 + 1/3.0]PStudent = [1 + 1/2.0]($12) = MRNonStudent
PStudent = $9.00
1,000
500
1,500
$10.00
$15.00
Supply
Demand
Quantity
Price
EQ,P = (dQ/dP)(P/Q) = (100)(5/1,000) = 0.50
CS = ½ (10)(1,000) = 5,000
000) = 2,500
PSPost Tax = ½ (4)(800) = 1,600
ê PS = 1,600 – 2,500 =  900
Deadweight Loss = ½ (3)(200) = 300
d 20 units of labor.
Cost = 150(20) + 200(30) = 9,000.
Per unit cost equals 9,000/600 = 15.00
y labor.
To produce 600 units of output you employ L = 200.
Cost = 150(200) = 30,000.
Per unit cost = 30,000/600 = 50.00
units of output, 600 = 15K1/3L2/3 = 15L1/3L2/3 = 15L.
Thus L = K = 40.
Total Cost = 200(40) + 100(40) = 12,000
Per unit cost = 12,0
= 3898.15
Wc = 1,900,000 + [38.15/40](100,000)
=
1,995,375
= 1,999,500 – 1995,375
π
= 4,125
pL = 0.0005(1,000,000)
= 500
pL +
= 500 + 4,125 = 4,625
π
» %
A
10 = 1.25
%º A
%§A = 10/1.25 = 8.00
%
QBeer = 0.75 '
15 = 11.25
or’s VMP = P
MP.
C) for Acme.
ntercept as ALC, but is twice as steep.
Your first step here is to draw the MLC curve on this graph.
Or, if you prefer algebra:
VMP = 200 – ½ L;
W = 20 + ½ L
MLC = 20 + L
Maximize profits where we have VMP = MLC
200 – ½ L = 20 + L
L = (2/3)(180 = 120
W = 20 + ½ (120) = 80
Wage
200
Supply
150
100
50
Demand
Labor
0
400
300
200
100
r L = 120.
Acme will offer a wage = 80.
Hence 140 = 5.00
MP.
MP = 140/5 = 28.
LC curve.
Subtract fixed costs from this figure to determine economic profit:
Profit = ½ (180)(120) – 9,600 = 1,200.
0  2Q = 0 for Q = 250 and P = 500 – 250 = 250
,000 =  2,500
= 100 = MC for Q = 150 and P = 250 – ½ (150) = 175
1,250
Q) = 1000  2Q = 400 = MC for Q = 300
80,000 = 10,000
Your firm faces random future demand, but you must commit to a
production decision today, before you know what demand will be.
Your firm’s cost function is C(Q) = 3,000 + 120Q.
Demand will be LOW:
Q = 200 – P with probability 1/5.
Or demand will be HIGH:
Q = 800 – 4P with probability 4/5.
1.
In order to maximize profits, you will produce _____ units of output.
a)
80
b) 100
c) 120
d) 140
e)
160
2.
If demand turns out to be LOW, you will set your price equal to _____ to sell all of your output.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Summer '09
 HOLLAND
 Economics, Game Theory, Supply And Demand, Auction, price sealed bid

Click to edit the document details