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Handout Ch 3

# Handout Ch 3 - AEB3510 Supplement Chapter 3 1 An importer...

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AEB3510 Supplement Chapter 3 1. An importer of Brazilian coffee estimates the demand for coffee to be 2 64800 ( ) Q p p = where p is price in dollars per pound. The price of coffee is estimated to be a function of time, t , as measured in weeks. The price per pound t weeks from now is estimated to be . 2 ( ) 0.04 0.2 12 p t t t = + + a. Express the demand for coffee as a function of time. b. What is the quantity demanded 10 weeks from now? 2. Assume that a manufacturer has estimated her production function to equal (40 ) ( ) 4 L L Q f L = = where Q is output and L is the number of workers hired (thus, output is determined by the number of workers hired). Assume that the price of the firm’s output does not depend on output (i.e., the price is constant). The market price for the firm’s output is currently \$40. a. Find her firm’s Total Revenue as a function of the number of workers hired ( L ). b. How many workers should she hire if she wants to maximize her Total Revenue? That is, find the value of L for which the TR -function is maximized 3.

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