3. Consider a dynamic (two-period) representative firm's problem. This representativefirm is given K unit of capital to produce in the current period. Firm can choose(current-period and future-period) labor demands and investment (to adjust future-period's capital stock) to maximize its present-value lifetime profit. Given that themarket interest rate is r and the capital depreciation rate is & after production in eachperiod. Let's further assume that this firm sells all the capital after future-periodproduction.(a) Clearly definite the profit functions for both periods and write down this repre-sentative firm's problem.(b) Write down the optimal condition on investment. Intuitively explain the optimalcondition.(c) Suppose K increases, graph the change of investment curve. Intuitively explainthe changes on the graph you just drew.

The objective of the question is to define the profit functions for a representative firm over two…

Answered: 3. Consider a dynamic (two-period)…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Problem 1QTC

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2. A man is considering investing P500, 000 to open a semi-automatic auto-washingbusiness in a city of 400, 000 population. The equipment can wash, on the average, 12 carsper hour, using two men to operate it and to do small amount of hand work. The man plansto hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 daysper week, 50 weeks per year. He will pay his employees P25. 00 per hour. He expects tocharge P25. 00 for a car wash. Out-of-pocket miscellaneous cost would be P8, 500 permonth.He would pay his employees for 2 weeks for vacations each year. Because of the length ofhis lease, he must write off his investment within 5 years. His capital now is earning 15%,and he is employed at a steady job that pays P25, 000 per month. He desires a rate ofreturn of at least 20% on his investment. Would you recommend the investment?a) Use ROR method b) Use present worth method c) Use future worth method d) Solve for the payback period and the IRR
6
Answer both please
4. Given the information that follows: Sales - 750,000, explicit costs 450,000, return you could have earned by investing your money elsewhere = 50,000, wages that you and your family members could have earned doing the same work for another firm = 70,000. The Accounting cost is equal to 30000 – WRONG ANS
2
Table 1 below shows the production of wooden table by Aurora Enterprise. As the manager d the company, you need to analyze the effectiveness of production and the relationship between fixed and variable input in order to maximize the production. From the data given, you can determine the effective stage of production that can provide high maximum profits. From the data provided, answer the following question. Please provide any figure or diagram in order to explain related theory. Table 1 Land Labourl Output Total Average Marginal Total Total Cost Product Product Product (TC) Variable (TP) (AP) (MP) Cost (TVC) 1 3 3 3 50 2 7 3.50 4 80 30 33 11 13 26 19 105 55 4 52 127 77 66 13.2 14 152 102 1 76 12.6 10 182 132 7 80 11.43 4 219 169 8 80 10 8.67 7.2 266 216 78 -2 328 278 10 72 -6 413 363 b. Based on table 1, calculate the amount of Average Fixed Cost (AFC),
Uncertain how to solve correctly
3. Consider a dynamic (two-period) representative firm's problem. This representative firm is given K unit of capital to produce in the current period. Firm can choose (current-period and future-period) labor demands and investment (to adjust future- period's capital stock) to maximize its present-value lifetime profit. Given that the market interest rate is r and the capital depreciation rate is & after production in each period. Let's further assume that this firm sells all the capital after future-period production. (a) Clearly definite the profit functions for both periods and write down this repre- sentative firm's problem. (b) Write down the optimal condition on investment. Intuitively explain the optimal condition. (c) Suppose K increases, graph the change of investment curve. Intuitively explain the changes on the graph you just drew.
3 Assume that Peter's short run Total Cost Curve is TC = 20,000q-200q² + q At an output quantity of 50, would you recommend that Peter increase his capital? What about with an output level of 150?
.Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $500 per unit, its accounting profits were?
The concept of Diminishing/Decreasing Marginal Returns is one of the core economic principles, and is a fundamental reason why small businesses stay small. What is an INCORRECT explanation of this principle. Small businesses eventually operate at full capacity, and the return on additional investment is zero/negative O Total returns are higher when investment small. Beyond a certain amount of investment, the value generated by each unit of additional investment is near-zero Returns per additional unit of investment are higher at low levels of investment O
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