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The market for high-quality caviar is dependent on the weather. If the weather is good, there are many fancy parties and caviar sells for $30 per pound. In bad weather it sells for only $20 per pound. Caviar produced one week will not keep until the next week. A small caviar producer has a cost function given byC = 0.5q2+ 5q + 100,whereq is weekly caviar production. Production decisions must be made before the weather (and the price of caviar) is known, but it is known that good weather and bad weather each occur with a probability of 0.5.
a. How much caviar should this firm produce if it wishes to maximize the expected value of its profits?
b. Suppose the owner of this firm has a utility function of the form utility= vp, where p is weekly profits. What is the expected utility associated with the output strategy defined in part (a)?
c. Can this firm owner obtain a higher utility of profits by producing some output other than that specified in parts (a) and (b)? Explain.
d. Suppose this firm could predict next week's price but could not influence that price. What strategy would maximize expected profits in this case? What would expected profits be?
Consider an economy with population growth at rate n = :03, technological growth at rate g = :02, depreciation at rate = :05, and a savings rate of s = :30. The economy is at steady state. (a) What is the rate of growth of aggregate income Y in this..
Write a two-page essay that explains why in perfect competition, there are no economic profits or losses in the long run. Use a minimum of two academic journal articles.
The market for semiskilled labor can be represented by the following supply and demand curves: ED = 32000 - 4000w and ES = -8000 + 6000w where E = millions of person hours per year and w = the wage in dollars per hour.
If you want to raise as much money as possible, would it be better if the text of that section men- tioned that your school is #3 in the nation in sports or that you are better than 99% of other schools at sports
(a) select an appropriate economic criterionand estimate the production rate based upon it. (b) how could you maximize output with minimum input . explain
(a) The government announces that the tax rate on laborincome will rise in the future. (b) An earthquake reduces the capital stock by10%. (c) A stock market boom raises people's wealth.
Firms often face the problem of allocating an input in fixed supply among different products. Find the optimal crude oil allocation in the proceeding example if the profit associated with fiber were cut in half, that is, fell to $0.375 per square ..
Suppose that the local gym has a marginal and average cost of 10 per visit. Calculate the profits associated with the following combinations of annual fee (T) and per visit fee (P), and determine which scheme generates the highest profit.
Summarize any recommendations you might make as to what should have been done differently, and why.
The sales information for the Lonestar Sports Apparel Corporation for the last 12 years as follows:
the company's value in the hands of current management is somewhere between $10 million and $110 million, uniformly distributed over this range. The current management will sell the company to you if, and only if, your bid exceeds the true value k..
You have the following end of year cash flows: Y0 = $400 Y1 = $300 Y2 = $200 Y3 = $100 Y4 = $0 Y5 = $0 Y6 = $0 Y7 = $500 Y8 = $500 Y9 = $500 Equate the following cash flows to equal cash flows in years 5,6,7,8 and 9. Let i = 8% per year.
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