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homework Ch 11 to 13




Question;The homework covers Ch 11~13. It has to be your individual;work. For each question, please show the necessary derivation (if applicable);and highligh t the answer. Limit your answers within 5 pages. No cover sheet is;required.Q1: CH 11 (30%)Consider a price-taking firm that has total fixed cost of;$50 and faces a market determined price of $2 per unit forits output. The wage;rate is $10 per unit of labor, the only variable input. Using the following table, answer thequestions below.(1) Units ofLabor (2)Output (3) MarginalProduct (4);MarginalRevenue Product (5)Marginal Cost (6)Profit1 5 2 15 3 30 4 50 5 65 6 77 7 86 8 94 9 98 10 96 a. Fill in the blanks in column 3 of the table by computing;the marginal product of labor for each level of labor usage.b. Fill in the blanks in column 4 of the table by computing;the marginal revenue product for each level of labor usage.c. How much labor should the manager hire in order to;maximize profit? Why?d. Fill in the blanks in column 5 of the table by computing;marginal cost.e. How many units of output should the manger produce in;order to maximize profit? Why?f. Fill in the blanks;in column 6 with the profit earned at each level of labor usage.g. Do your answers to parts c and e maximize profit? Does it matter whether the manager chooses;labor usage or chooses output in order to maximize profit? Why?h. How much labor should the manager hire when the wage rate;is $20? How much profit is earned? Is marginal product greater or less than;average product at this level of labor usage?;Why does it matter?Q2: CH 11 (15%)Suppose you won a hoe remodeling company. You are currently earning short-run;profits. The home remodelingindustry is an increasing-cost industry. In the long run, what do you expect will;happen toa. Your firm?s costs of production? Explain.b. The price you can charge for your remodeling;services? Why?c. Profits in home remodeling? Why? Q3: CH 12 (15%)Higher;unemployment caused by;the recession and;higher gasoline prices;have contributed to;a substantial reduction during;2008 in the number of vehicles on roads, bridges, and in tunnels. According to The Wall Street Journal (April;28, 2009), the reduction in demand for toll bridge and tunnel crossing created;a serious revenue problem for many cities.;In New York, the number of vehicles traveling across bridges and through;tunnels fell from 23.6 million in January 2008 to 21.9 million in January;2009. ?That drop presents a challenge;because road tolls subsidize MTA subways, which are more likely to be used as;people get out of their cars.? In an apparent attempt to rise toll revenue, the;MTA increased tolls by 10 percent on the nine crossings it controls.a. Is MTA a;monopolist in New York City? Do you think MTA possesses a high degree of market;power? Why or why not?b. If the marginal cost of letting another vehicle cross a;bridge or travel through a tunnel is nearly zero, how should the MTA set tolls;order to maximize profit? In order to;maximize toll revenue? How are these two;objectives related?c. With the decrease in demand for bridge and tunnel;crossings, what is the optimal way to adjust tolls: raise tolls,lower tolls, or leave tolls unchanged? Explain carefully?Q4: CH 12 (20%)The Ali Baba Co. is the only supplier of a particular type;of Oriental carpet. The estimated demant;for its carpets isQ = 112,000 ? 500P + 5MWhere Q = number of carpets, P = price of carpets (dollars;per unit), and M = consumers? income per capita. The estimated average variable cost function;for Ali Baba?s carpets isAVC = 200 ? 0.012Q + 0.000002Q2Consumer?s income per capita is expected to be $20,000 and;total fixed cost is $100,0000. a. How;many carpets should the firm produce in order to maximize profit?b. What is the;profit maximizing price of carpets?c. What is the;maximum amount of profit that the firm can earn selling carpets?d. Answer parts a;through c if consumers? income per capita is expected to be $30,000 instead.Q5: CH 12 (20%)A firm with two factories, one in Michigan and one in Texas;has decided that it should produce total of 500 unitsto maximize profit.;The firm is currently producing 200 units in the Michigan factory and;300 units in the Texasfactory. At this;allocation between plants, the last unit of output produced in Michigan added;$5 to total cost, while the last unit of output produced in Texas added $3 to;total cost.a. Is the firm;maximizing profit? If so, why? If not, what should it do?b. If the firm;produces 201 units in Michigan and 299 in Texas, what will be the increase;(decrease) in the firm?stotal cost;="msonormal">


Paper#55789 | Written in 18-Jul-2015

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