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# 1. An engraining firm recently conducted a study to determine its benefit and cost

structure. The results of the study are as follows: B(Y)=300y - and C(Y) = 4

What is the marginal benefit and marginal cost? (Hint: use derivative to solve this problem)

2. You are in the market for a new refrigerator for your company's lounge, and you have narrowed the research down to two models. The energy-efficient model sells for \$700 and will save you \$45 at the end of each of the next five years in electricity costs. The standard model has features similar to the energy-efficient model but provides no future saving in electricity costs. It is priced at only \$500. Assuming your opportunity cost of funds is 6 percent. Which refrigerator should you purchase?

3. You are the human resources manager for a famous retailer, and you are trying to convince the president of the company to change the structure of employee compensation. Currently, the company's retail sales staff is paid a flat hourly wage of \$20 per hour for each eight hour shift worked. You propose a new pay structure whereby each salesperson in a store would be compensated \$10 per hour, plus 1 percent of that store's daily profits. Assume that, when run efficiently, each store's maximum daily profits are \$25,000. Outline the arguments that support your proposed plan.

4. An owner can lease his building for \$120,000 per year for three years. The explicit cost of maintaining the building is \$40,000, all revenues are received, and costs born, at the end of each year. If the interest rate is 6 percent, determine the present value of the steam of accounting profits.

5. Suppose that the total benefit and total cost from a continuous activity are B(Q) = 76 + 24Q - 2Q2   and C(Q) = 60 + 6Q. What level of Q maximize net benefits? At the value of Q that maximize net benefits, what is the value of marginal net benefits?

6. Suppose that the demand and supply are given by Qdx = 14 - 1/2Px and Qsx = 1/4Px - 1. Determine the equilibrium price and quantity.

7. The demand curve for product X is given by Qx = 200 - 4Px

a. Find the inverse demand curve.

b. How much consumer surplus do consumer receive when Px = \$30?

c. In general, what happens to consumer surplus as the price of good rises?

8. Suppose demand and supply are given by Qd = 60 - P and Qs = P -20

a. What are the equilibrium quantity and price in this market?

b. Determine the quantity demanded, the quantity suppled, and the magnitude of the surplus id a price floor of \$50 is imposed in this market.

c. Determine the quantity demanded, the quantity suppled, and the magnitude of the shortage if a price celling of \$32 is imposed in this market. Also determine the full economic price paid by consumers.

9. The supply curve for product X is given by Qsx = -520 + 20Px

a. Find the inverse supply curve.

b. How much surplus the do producers receive when Qx400? When Qx =1200?

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