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Question;ThehomeworkcoversCh11~13.Ithas tobeyourindividual work.Foreachquestion,pleaseshowthenecessaryderivation(ifapplicable)andhighlightthe;answer. Limit;youranswerswithin 5 pages.Nocoversheet;is;required.;Q1;CH11;(30%);Consideraprice-takingfirmthathastotalfixedcostof$50andfacesamarketdeterminedpriceof$2perunitfor;itsoutput.;Thewagerateis$10perunitoflabor,theonlyvariableinput.;Usingthefollowingtable,answerthe;questionsbelow.;(1)Unitsof;Labor;(2);Output;(3)Marginal;Product;(4)Marginal;RevenueProduct;(5);Marginal Cost;(6);Profit;1;5;2;15;3;30;4;50;5;65;6;77;7;86;8;94;9;98;10;96;a.Fillintheblanksincolumn3ofthetablebycomputingthemarginalproductoflaborforeachleveloflabor;usage.;b.Fillintheblanksincolumn4ofthetablebycomputingthemarginalrevenueproductforeachleveloflabor usage.;c.How much labor should themanager;hire in;ordertomaximizeprofit?Why?;d.Fill;intheblanksincolumn;5ofthetablebycomputing marginal cost.;e.How many unitsofoutputshouldthemanger producein orderto;maximizeprofit?Why?;f. Fill intheblanksincolumn 6 with theprofitearnedateach leveloflaborusage.;g.Doyouranswerstopartscandemaximizeprofit?;Doesitmatterwhetherthemanagerchooseslaborusageor;chooses outputin ordertomaximizeprofit?Why?;h.Howmuchlaborshouldthemanagerhirewhenthewagerateis$20?Howmuchprofitisearned?Ismarginal product greaterorlessthan;averageproduct;at;thisleveloflaborusage?;Whydoesitmatter?;Q2: CH11 (15%);Supposeyouwonahoeremodelingcompany. Youarecurrentlyearningshort-runprofits.;Thehomeremodeling;industryisanincreasing-costindustry.;In thelong;run,whatdo you;expectwill happen to;a.Yourfirm?scostsofproduction?Explain.;b.Thepriceyoucanchargeforyourremodeling;services?;Why?;c.Profitsin;homeremodeling? Why?;Q3;CH12;(15%);Higher unemployment caused by;the;recession and higher;gasoline prices have;contributed to a substantial reductionduring2008inthenumberofvehiclesonroads,bridges,andintunnels.;AccordingtoThe;WallStreet Journal(April28,2009),thereductionindemand;fortollbridgeandtunnelcrossingcreatedaseriousrevenue;problemformanycities.;InNewYork,the;numberofvehiclestravelingacrossbridgesandthrough tunnelsfell;from23.6millioninJanuary2008;to21.9;millioninJanuary2009.;?Thatdrop presentsachallenge,becauseroad tollssubsidizeMTAsubways,whichare morelikelytobeusedaspeoplegetoutof theircars.?Inanapparent attempttorisetollrevenue,theMTA increasedtollsby10;percentontheninecrossingsitcontrols.;a.;Is MTAamonopolistin;New;York City?Doyou;think MTApossessesahighdegreeofmarket;power?Whyor whynot?;b.Ifthemarginal costofletting anothervehiclecrossabridgeortravelthroughatunnelisnearlyzero,how;should;the;MTAsettollsordertomaximizeprofit? Inordertomaximizetoll revenue? How;arethese twoobjectives related?;c.Withthedecreaseindemandforbridgeandtunnelcrossings,whatistheoptimalwaytoadjusttolls:raisetolls;lowertolls, orleavetollsunchanged?;Explaincarefully?;Q4;CH12;(20%);TheAli BabaCo.isthe onlysupplier;ofaparticulartypeofOriental;carpet. Theestimateddemant foritscarpetsis;Q= 112,000 ?500P+;5M;WhereQ= numberofcarpets,P=;priceofcarpets(dollarsperunit),andM=;consumers?incomepercapita. The estimatedaveragevariablecost functionforAli Baba?scarpetsis;AVC= 200?0.012Q+;0.000002Q2;Consumer?sincomepercapitaisexpectedto be$20,000 and total fixedcostis$100,0000.;a.;How;many carpetsshouldthefirm;producein;orderto maximizeprofit?;b. Whatisthe;profitmaximizing;priceofcarpets?;c.;Whatisthe maximumamountofprofitthatthefirm canearn selling carpets?;d. Answer;partsathrough cifconsumers? incomepercapitaisexpectedto be$30,000 instead.;Q5;CH12;(20%);Afirmwithtwofactories,oneinMichiganandoneinTexas,hasdecidedthatitshouldproducetotalof500units;tomaximizeprofit.;Thefirmiscurrentlyproducing200unitsintheMichiganfactoryand300unitsintheTexas;factory. Atthisallocationbetween plants,thelastunitofoutputproducedin Michiganadded$5;tototal cost,while;the;lastunitofoutputproducedin;Texasadded$3 tototal;cost.;a.;Isthefirm maximizing profit?Ifso, why?Ifnot,whatshoulditdo?;b.;Ifthefirmproduces201unitsinMichiganand299inTexas,whatwillbetheincrease(decrease)inthefirm?s;total cost

 

Paper#55816 | Written in 18-Jul-2015

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