You are watching: An economist estimated that the cost function of a single-product firm is:
a. answer is 90 asb. Relocation Q through 10. 90+35(10)+25(10)^2+10(10)^3-90 = 12,850c. Variable price - addressed cost, or 12,850-90 = 12,760d. addressed price / amount, or 90/10 = 9e. variable cost / amount, or 12,850/10 = 1285f. average fixed price + average variable expense, or 1285+9 = 1294g. Take part of the original equation, take the power number and also multiply by the number it results, then reduce the power number by 1. 35Q + 25Q^2 + 10Q^3 becomes35 + 50Q + 30Q^2. Since Q = 10, solve for answer: 3535
A manager hires labor and also leas capital devices in an extremely competitive sector. Right now the wage price is $8 per hour and capital is rented at $12 per hour. If the marginal product of labor is 60 systems of output per hour and the marginal product of capital is 50 units of output per hour, have to the firm rise, decrease, or leave unreadjusted the amount of funding provided in its production process?
A firm"s product sells for $4 per unit in a extremely competitive market. The firm produces output making use of capital (which it rents at $25 per hour) and labor (which is passist a wage of $30 per hour under a contract for 20 hrs of labor services). Complete the complying with table and also usage that information to answer the inquiries that follow.
Working notes:(1) MPK = Change in output (Q) / Change in K(2) APK = Q / K and also APL = Q / L(3) VMPK = MPK x Price = 4 x MPK(4) Total cost = wL + rKWhen Q = 0, TC = Fixed price (FC)So, FC = 20 x $30 = $600(5) Profit = (P x Q) - TC = 4Q - (wL + rK) = 4Q - 600 - 25K
A firm deserve to manufacture a product according to the production function:Q = F(K,L) = K^3/4 L^1/4.a. Calculate the average product of labor, APL, as soon as the level of capital is addressed at 81 units and the firm provides 16 systems of labor.b. Find an expression for the marginal product of labor, MPL, when the amount of funding is addressed at 81 devices.Then, illustrate that the marginal product of labor counts on the amount of labor hired by calculating the marginal product of labor for 16 and 81 systems of labor.c. Suppose capital is resolved at 81 units. If the firm have the right to offer its output at a price of $200 per unit and deserve to hire labor at $50 per unit, exactly how many kind of devices of labor need to the firm hire in order to maximize profits?
a) When K = 81 &(1) L = 16.Q = (81)3/4 x (16)1/4 = 27 x 2 = 54APL = Q / L = 54 / 16 = 3.375(ii) L = 256Q = (81)3/4 x (256)1/4 = 27 x 4 = 108APL = Q / L = 108 / 256 = 0.422(b) MPL = dQ / dL = (1/4) x K3/4L-3/4(i) When K = 81, MPL = (1/4) x (81)3/4L-3/4 = (1/4) x 3 x L-3/4 = 0.75 x L-3/4(ii)When L = 16, MPL = 0.75 x (1/8) = 0.0938When L = 81, MPL = 0.75 x (1/27) = 0.028As L boosts, MPL decreases. So MPL relies on L.(c)Firm should hire labor upto that allude wbelow Price x MPL = wage rateWhen K = 81, MPL = 0.75 x L-3/4$200 x 0.75 x L-3/4 = $50L3/4 = 3Raising each side to (4/3)rd power,L = 4
The World of Videos opeprices a retail store that rental fees movie videos. For each of the last 10 years, World of Videos has repetitively earned revenues exceeding $36,000 per year. The store is situated on prime genuine estate in a college town. World of Videos pays $2,300 per month in rent for its building, however it offers only 50 percent of the square footage rented for video rental purposes. The various other portion of rented space is essentially vacant. Noticing that World of Videos only occupies a part of the structure, a real estate agent told the owner of World of Videos that she could include $1,650 per month to her firm"s profits by renting out the unprovided percentage of the store. While the prospect of including an additional $1,650 to World of Videos"s bottom line was enticing, the owner was likewise contemplating making use of the extra room to rent video games. What is the chance price of using the unused portion of the structure for video game rentals?
You were freshly hired to relocation the manager of the Roller Division at a major conveyor-manufacturing firm, despite the manager"s solid outside sales record. Roller production is reasonably simple, requiring just labor and a maker that cuts and also crimps rollers. As you start reviewing the company"s manufacturing indevelopment, you learn that labor is paid $13 per hour and the last worker hired produced 100 rollers per hour. The company leas roller cutters and crimping equipments for $16 per hour, and the marginal product of funding is 120 rollers per hour.Should you readjust the mix of funding and also labor, and also if so, how should it change?
L = 100/13 = 7.69 > Capital = 120/16 = 7.5Because labor exceeds funding, You must rise labor and decrease funding.
Suppose the marginal benefit of writing a contract is $100, independent of its size. Find the optimal contract length when the marginal price of writing a contract of size L is:a. MC(L) = 35 + 5L.b. MC(L) = 55 + 3L.
Identify whether each of the adhering to transactions involves spot exreadjust, contract, or vertical integration.a. Barnacle, Inc., has actually a legal responsibility to purchase 2 lots of structural steel per week to manufacture conveyor frames.b. Exxon-Mobil uses the oil extracted from its wells to create raw polypropylene, a type of plastic.c. Boat Lifts R Us purchases generic AC electric motors from a local distributor.d. Kaspar Construction—a home-building contractor—purchases 50 pounds of nails from the local Home Depot.
Refer to the number listed below. Suppose that the marginal benefit of composing a contract is $100 and also the marginal expense of that contract is $50. Based on this indevelopment, the optimal contract size should:
Be increasedWhen expense is less than benefit, increase contract size. When cost is the same as advantage, contract size must be constant. When cost is even more than benefit, contract should be decreased
Describe exactly how a manager that derives satisfactivity from both revenue and also shirking allocates a 10-hour day in between these tasks once phelp an yearly, resolved salary of $120,000.When this same manager is given an annual, solved salary of $120,000 and 3 percent of the firm"s profits—amounting to a complete salary of $155,000 per year—the manager chooses to work-related 8 hours and shirks for 2 hours. Given this indevelopment, which of the compensation schemes does the manager prefer?
Time working: 0 hoursTime shirking: 10 hoursThe scheme via fixed payment of $120,000 and also a percent of revenues.
Recently, the owner of a Trader Joe"s franchise made a decision to readjust just how she compensated her optimal manager. Last year, she phelp him a resolved salary of $55,000 and also her save made $120,000 in revenues (not counting payment to her peak manager). She suspected the save could carry out a lot better and also feared the resolved salary was bring about her height manager to shirk on the task. As such, this year she decided to offer him a fixed salary of $28,000 plus 15% of the store"s profits. Due to the fact that the adjust, the store is perdeveloping much better, and also she forecasts profits this year to be $260,000 (again, not counting the payment to her peak manager). Assuming the adjust in compensation is the factor for the boosted earnings, and also that the forecast is precise, how much even more money will the owner make (net of payment to her top manager) because of this change?Does the manager make more money under the new payment scheme?
0.15*260,000 = 39,00039,000+28,000 = 67,000260,000-67,000 = 193,000120,000-55,000 = 65,000193,000-65,000 = 128,000 = answer 1Yes = answer 2. 67,000>55,000
The manager of your company"s pension fund is compensated based completely on fund performance; he earned over $1.2 million last year. As a result, the money is contemplating a proposal to cap the compensation of money managers at $100,000. Which of the adhering to is a likely consequence of this proposed change in compensation?
The fund manager will certainly have actually lower incentives to maximize the worth of the money, causing a reduced return for the participants.
Jim"s diner is just about to open up in Memphis, Tennescheck out. However before, Jim is trying to decide whether he wants to sell Coke or Pepsi soda products. He determines that, to market either product, he will certainly need to spfinish $1,800 in sunk expenses to purchase and also install the proper paraphernalia, e.g., a huge Coca-Cola or Pepsi sign out front. Ultimately, he chooses to sell Coke commodities and agrees to pay Coke 5 cents per ounce of Coke marketed for the appropriate to usage its product. After Jim renders the investments particular to his soda selection, Coke retransforms and also asks for a solved (one-time) fee in enhancement to the 5 cents per ounce. What is the most Jim must be willing to pay?
Ten firms complete in a industry to sell product X. The complete sales of all firms marketing the product are $2,500,000. Ranking the firms" sales from greatest to lowest, we uncover the optimal four firms" sales to be $415,000, $350,000, $280,000, and also $195,000, respectively. Calculate the four-firm concentration proportion in the sector for product X.
Total Sales=$2500000Market Share 1= 415000/2500000 = 17%Market Share 2= 350000/2500000 = 14%Market Share 3= 280000/2500000 = 11%Market Share 4= 195000/2500000 = 8%Four Firm Concentartion Ratio=.17+.14+.11+.08=.50=50%
An market is composed of 3 firms through sales of $250,000, $825,000, and $315,000.a. Calculate the Herfindahl-Hirschguy index (HHI).b. Calculate the four-firm concentration ratio (C4).c. Based on the FTC and also DOJ Horizontal Merger Guidelines defined in the message, is the Department of Justice likely to attempt to block a horizontal merger in between 2 firms via sales of $250,000 and also $315,000?
a. First, sum of the 3 sales = 1,390,000HHI = 10,000<(250,000/1,390,000)^2 + (825,000/1,390,000)^2 + (315,000/1,390,000)^2> = 4360 rounded upb. amount of the sales / sale full, or 1,390,000/1,390,000 = 1c. 250,000 + 315,000 = 565,00010,000<(250,000/565,000)^2 + (315,000/565,000)^2>= 312,789 This is even more than 100-200 distinction, so it will certainly be challenged.
The market elasticity of demand also for devices is −2, while the elasticity of demand for an individual gadget manufacturer"s product is −10. Based on the Rothskid method to measuring market power, we conclude that:
In this problem, elasticity of firm and market are -2. So index is 1. It indicates visibility of adequate degree of monopoly power in the market.
A firm has $1,600,000 in sales, a Lerner index of 0.55, and a marginal cost of $45, and competes against 1000 other firms in its pertinent sector.a. What price does this firm charge its customers?b. By what factor does this firm note up its price over marginal cost?
(a) Suppose Fiat newly entered into an Agreement and also Plan of Merger with Case for $4.3 billion. Prior to the merger, the market for four-wheel-drive tractors contained five firms. The market was highly concentrated, with a Herfindahl-Hirschguy index of 2,685. Case"s share of that market was 9 percent, while Fiat consisted of just 5 percent of the sector. If approved, by exactly how a lot would certainly the postmerger Herfindahl-Hirschmale index increase?(b) Based just on this information, is the Justice Department most likely to difficulty the merger according to the Horizontal Merger Guidelines?
a. 210,0000.09*0.05 = 9090+2685 = 2775b. Possibly because of 2775 being above 2500 article merger, but the amount of the index boost is just 90, which is listed below the 100-200 amount in which an obstacle typically takes place
(a) Several years back, Pfizer and also Warner-Lambert agreed to a $90 billion merger, hence developing among the world"s largest pharmaceutical companies. Pharmaceutical companies tend to spfinish a higher percent of sales on R&D activities than various other industries. The government motivates these R&D activities by giving service providers patents for drugs apverified by the Food and Drug Administration. For instance, Pfizer-Warner-Lambert invested large sums of money arising its famous cholesterol-lowering drug, Lipitor, which is currently protected under a patent. Lipitor sells for about $3 per pill. Calculate the Lerner index if the marginal expense of developing Lipitor is $0.30 per pill.(b) Does the Lerner index make sense in this situation?
PART-1Solution: 0.9Explanation: The Lerner index is L = (P - MC) / P = ($3 - $0.30) / $3 = 0.9PART-2Solution: Yes, Lipitor has a patent-defended monopolyExplanation: The Lerner index is 0.9, which indicates the firm has significant industry power. This provides sense bereason the product that the firm sells is currently under patent defense, which fundamentally renders the firm a legal monopoly.
See more: Why Do Managers Consider Direct Costs To Be More Accurate Than Indirect Costs?
In the 1990s 5 firms provided amateur shade film in the United States: Kodak, Fuji, Konica, Agfa, and also 3M. From a technological viewsuggest, tright here was bit distinction in the high quality of shade film produced by these firms, yet Kodak"s industry share was 67 percent. The very own price elasticity of demand also for Kodak film was - 2.0 and the market elasticity of demand also was - 1.75. Suppose that in the 1990s, the average retail price of a roll of Kodak film was $6.95 and also that Kodak"s marginal cost was $3.475 per roll. Based on this indevelopment, calculate the Rothschild index and Kodak"s Lerner index.Which type of industry framework ideal explains the film sector in the 1990s?
The manager of a regional monopoly approximates that the elasticity of demand also for its product is consistent and equal to -3. The firm"s marginal cost is consistent at $25 per unit.a. Expush the firm"s marginal revenue as a role of its price.b. Determine the profit-maximizing price.
The CEO of a significant automaker overheard among its department managers make the adhering to statement about the firm"s production plans: "In order to maximize profits, it is essential that we run at the minimum suggest of our average full expense curve." If you were the CEO of the automaker, would you praise or chastise the manager?
A firm sells its product in a perfectly competitive sector where other firms charge a price of $120 per unit. The firm"s full costs are C(Q) = 60 + 8Q + 2Q2.a. How much output must the firm produce in the short run?b. What price must the firm charge in the brief run?c. What are the firm"s short-run profits?d. What adjustments have to be anticipated in the lengthy run?
a. How a lot output must the firm produce in the short run?Wright here MC = Price.MC = 8 + 4Q = 1204Q = 120 - 8 = 112Q = 112/4 = 28b. What price must the firm charge in the short run?Prices are provided as $120 (all firms have the same price)c. What are the firm"s short-run profits?Profit = Total Revenue - Total CostProfit = Price * Quantity - TCProfit = 120*28 - (60 + 8(28) + 2(28)(28))Profit = 3360 - (60 + 224 + 1568)Profit = 3360 - 1852 = 1508d. What adjustments need to be anticipated in the lengthy run?In lengthy run, Entry will happen until financial profits shrink to zero
The elasticity of demand also for a firm"s product is -2.5 and its declaring elasticity of demand is 0.25. a. Determine the firm"s optimal advertising-to-sales proportion.b. If the firm"s revenues are $60,000, what is its profit-maximizing level of advertising?
You are the manager of a little pharmaceutical firm that obtained a patent on a brand-new drug three years earlier. Despite strong sales ($175 million last year) and also a low marginal cost of creating the product ($0.75 per pill), your agency has yet to present a profit from marketing the drug. This is, in part, as a result of the reality that the company spent $1.8 billion arising the drug and obtaining FDA approval. An economist has actually estimated that, at the existing price of $1.75 per pill, the own price elasticity of demand for the drug is -3. Based on this information, what deserve to you carry out to rise profits?
Principles of Macroeconomics5th EditionBen Bernanke, Robert Frank
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