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Joe Brown's dairy operates in a perfectly competitive marketplace. Joe's machinery costs $500 per day and is the only fixed input. His variable costs are comprised of the wages paid to the few workers he employs at the dairy and the grain he feeds to his dairy cows. The variable cost associated with each level of output is given in the accompanying table. Gallons of Milk Variable Cost 0 - 1000 $ 2,100 2000 $ 2,200 3000 $ 3,380 4000 $ 3,600 5000 $ 3,900 a. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. Gallons of Milk FC VC TC MC AVC ATC 0 $500 - 0 - - - 1000 500 $ 2,100 2600 2.60 2.10 2.60 2000 500 $ 2,200 2700 1.35 1.10 1.35 3000 500 $ 3,380 3880 1.02 1.13 1.02 4000 500 $ 3,600 4100 1.03 .90 1.03 5000 500 $ 3,900 4400 .88 .78 .88 b. What is the break-even price? c. What is the shut-down price?
Jim's Car Rental has fixed costs of $220,000 per month and variable costs per car rented per day of $3. If Jim's charges $25 per day to rent a car, how many car-rental days (the number of cars rented times the number of days each is rented) must J..
Suppose the world price for a good is 40 and the domestic demand and supply cureves are given as: Demand: P=80-2Q Supply: P=5+3Q A) How much is consumed? B) How much is produced at home? C) What are the values of consumer and producer surplus?
Consider a simultaneous move quantity-setting game with two firms facing a demand curve p = 100 - q. Both firms have marginal cost of 20. Suppose one firm maximizes profit and the other maximizes revenue, but both take into account the other firm'..
Assume that the country is in a period of high unemployment, interest rates are at almost zero, inflation is about 2% per year, and GDP growth is less than 2% per year. Suggest how fiscal and monetary policy can move those numbers to an acceptable..
"Financial crises, such as the recent ‘sub-prime' credit crisis, have significant disruptive effects on the flow of funds in the financial system". With the aid of examples, show how the Reserve Bank of Australia has dealt with the 2008 Global Fin..
Consider an investment project with the following cash flows: n Porject A Project B 0 -$150,000 -$120,000 1 $30,000 $25,000 2 $25,000 $15,000 3 $120,000 $110,000 A) Compute the IRR for each investment B) At MARR= 15% determine the acceptability of..
A cell phone company is considering investing in additional cell phone towers. It estimates that if it builds K towers, its benefit in terms of increased profits will be: B(K)=500K-K^2 in millions. Assume each tower costs $20 million to build.
Define a variable Z that is a function of the sample average ? and follows a standard normal distribution. What is the probability that ? will be in the interval [1, 3] What is the probability that ? will be in the interval [-1, 1] What is the probab..
suppose a single firm produces all of the output in a contestable market. The market inverse demand function is P=100 -Q, and the firm cost's function is C(Q) = 2Q. Determine the firm's equilbrium price and corresponding profits.
A family bought a house in October 1998 for $200,000. The house was financed by a mortgage where they paid 20% of the value and the bank financed the balance of the loan at 9% annual interest compounded monthly [.0075% monthly] over a 15-year peri..
Suppose the world price of crude oil is $15. What would be the equilibrium price and quantity under free trade? Find the price of oil, the total quantity traded, and the domestic quantity supplied. Assume you can treat foreign supply of oil as inf..
Tom is a utility maximizer with an income of $200/week, which he spends on two goods, food and clothing. The unit prices of food and clothing are $3 and $20 respectively. 1.) Draw a graph that shows Tom's choice using an indifference curve and his..
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