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Spring%202010%20-%20Final%20-%20Blue

# Spring%202010%20-%20Final%20-%20Blue - = 3898.15 1,000 Or...

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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 = {(44,000-20,000)/(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) = MRNon-Student 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.

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