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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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
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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?
How are big businesses beneficial in financially supporting smaller businesses that are struggling from COVID-19? -include terms: capital, corporations. (Economics - Grade 11)
1. Suppose your current job pays you $300,000 a year. However, you are considering starting your own company. Based upon your research, you estimate your first year total revenue to be $7,500,000. There are however several costs of running the company during this first year, such as the cost of materials which will equal $2,750,000, employees who will receive in total $1,500,000, utilities which will cost $1,200,000, and rent that will be paid to the landlord that equals $1,800,000. Based on this information, solve for both your accounting profit and economic profit during this first year. Also, based upon these profit values, state whether you are better off starting this company or staying in your current job.
a) The owners of firms in the real world would generally expect (in the long run at least) to have some positive of profits on their accounting statements. However, in economic models we usually assume that firms will be willing to operate for zero economic profits even for the long term. Explain why this is the case.
18
be Question 2: Should a firm invest? (show all your work. Points will be deducted for no work) (20 points) A firm learns a firm has an investment opportunity that will earn future revenue 4 years from now by $160,000. The marginal cost of the physical capital today is $125,000. The firm makes this investment at an interest rate of 5%. Using this information answer the questions below 1. Should this frim make this investment? 2. What is the discounted percentage for this investment? 3. Other things being equal, could this investment be made a higher interest rate? Lower? Why, Show with numbers 4. Other things being equal, could this investment be made for longer term? Shorter term? Why?, Show with numbers
4. Last year Wei Guan Inc. had $350 million of sales, and it had $270 million of fixed assets that were used at 63% of capacity. In millions, by how much could Wei Guan's sales increase before it is required to increase its fixed assets? Please TYPE
(Scenario: Accounting and Economic Profit) Use Scenario: Accounting and Economic Profit. What is the opportunity cost of Wang's $100,000 inheritance being used to start his business?Scenario: Accounting and Economic ProfitRather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was $150,000.

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