1. Verify numerically that when TC = Q² mar- ginal cost is MC = 2Q. 2. What are the optimal output, price, and profits can select the quantity to purchase. What transfer price will the manufacturing unit select? What are the resulting profits of the %3D %3D for the firm? two units? 4. From the firm's standpoint, what is the optimal transfer price? 3. Now assume that the firm is divided into two profit centers. One division manufactures the

1. Verify numerically that when TC = Q² mar- ginal cost is MC = 2Q. 2. What are the optimal output, price, and profits can select the quantity to purchase. What transfer price will the manufacturing unit select? What are the resulting profits of the %3D %3D for the firm? two units? 4. From the firm's standpoint, what is the optimal transfer price? 3. Now assume that the firm is divided into two profit centers. One division manufactures the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. Rusty Trawler imports oil from Saudi Arabia. His cost function (for purchasing and delivering the oil) is TC = 5000+.1Q² where Q is the number of barrels of oil delivered. He may sell all the oil he can deliver for $60 per barrel (so TR = 60Q). Given these conditions, what are Rusty's maximum possible profits? a) $0 b) $300 c) $2,500 d) $4,000
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You are planning to setting up a Fruity Juice Stand. The stand itself costs IDR2,000,000,- The ingredients for each plastic glass of Fruity Juice costs IDR 5,000,- a. What is your fixed cost of doing business? What is your variable cost perplastic glass of fruity juice? b. Construct a table showing your total cost, average total cost, and marginalcost for output levels varying from 0 to10 gallons. (Hint: There are 16 plasticglass in a gallon) c. Draw the three cost curves!
Desmond works as an accountant making $80,000 per year. He is considering leaving his job to open an artisanal cheese shop. He estimates that he will need to spend $20,000 per year on space, $10,000 per year on supplies and $40,000 per year on staff. The shop will earn will earn $120,000 per year in revenue. Assuming his estimates are accurate, what will Desmond's accounting profit be? Assuming his estimates are accurate, what will Desmond's economic profit be? Please enter your solution without commas, dollar signs, or cents.
Looking at the Table, Profit, Cost and Revenue Functions, Quant is the quantity of output, C(Q) is the Total Cost of production for corresponding quantities of output, R(Q) is the corresponding Total Revenue at each level of output Q, if all output is sold and PRF(Q) is the Total Profit for each corresponding output level. PRF(Q) is calculated as R(Q)-C(Q). Using this information, does the company make its highest profit where R(Q) is highest? a. No, because the highest possible revenue may be at an output level where the cost of output may exceed the revenue generated at that output level. In this problem, the highest profit is at output level 15 Ob. Yes, because there is no way that cost can exceed revenue when revenue is maximized. Cc. No, because the highest possible revenue may be at an output level where the cost of output may exceed the revenue generated at that output level. In this problem, the highest profit is at output level 10 or 12 or in between. Od. Yes, because the…
4. Smarty’s Dish company manufactures household and commercial satellite dishes according to the production function. C(Q1, Q2) = 100 + 5Q1 + 2Q2 + .5Q1Q2 Where Q1 and Q2 are household and commercial satellite dishes produced in a day, respectively. Suppose Smarty produces 10 household dishes and 8 commercial dishes per day. Should he divide production into separate facilities? Why? a. No. The firm enjoys cost complementarities b. Yes, because the firm does not realize cost complementarities c. No, because even though the firm does not enjoy cost complementarities, it does realize economies of scope at this level of output. d. Yes, because the firm does not enjoy cost complementarities, and it does not realize economies of scope at this level of output.
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Answer each of the following as true or false and briefly explain your answer. 9 39 8 1a) If ec> 1, increasing returns to scale and decreasing average costs are indicated 1b) 7 17 ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ Average cost exceeds marginal cost at the minimum efficient scale of plant. 0 0 1c) DA When total fixed cost and price are held constant, a reduction in average variable cost will typically cause a reduction in the breakeven activity level. 10X00X0 0,0 0,0 0 When long-run average cost is decreasing, it can pay to operate smaller plants at their peak efficiency rather than larger plants with some excess capacity.