Let's explore how rising costs helped to kill off most printed newspapers after the Internet became available in the mid-1990s. Imaginethat you are a newspaper publisher in the year 2004. You are in the middle of a one-year factory rental contract that requires you topay $700,000 per month, and you have contractual salary obligations of $1,250,000 per month that you can't get out of. You also havea marginal printing cost of $0.25 per paper as well as a marginal delivery cost of $0.10 per paper.Instructions: Enter your answers rounded to two decimal places.a. If sales fall by 20 percent from 1,000,000 newspapers per month to 800,000 newspapers per month, what happens to the AFC pernewspaper?AFC per newspaper risesfrom $to $b. What happens to the MC per newspaper?MC per newspaper does not changec. What happens to the minimum amount that you must charge to break even?It risesfrom $to $

a)The AFC increases. For 1 million papers, AFC = (700,000+1,250,000+0.35*1,000,000).1000000 =…

Answered: Let's explore how rising costs helped…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. A production process using two inputs, labor and capital is Q = 5LK where Q is output per day. MPK = 5L and MPL = 5K. The wage (w) = $150 per hour and (r) = $1,000 per hour. Determine the least cost combination of K and L when the desired output is 1,000 What is the minimum cost of producing 1,000 per day?
Month (m): 4 Day (d): 1 Use the two numbers above, m and d, to complete the cost function for a perfectly competitive firm: Cost (q) = m q2 + d = (30) For a cost function like yours, Marginal Cost (MC) = 2 m q . Specifically, what are the following for the cost function you wrote out above? Fixed Cost = Average Total Cost = Cost (q)/q = Variable Cost = Average Fixed Cost = FC/q = Marginal Cost = 2 m q = Average Variable Cost = VC/q = (15) Fill in the table with your values from your cost function. q Total Cost AVC AFC ATC MC 0 0 0 -- -- -- 1 2 3 4 5 6
In Bushville, residents typically either work as salaried employees or owns small business on Central Square. Salaried employees on average earn $56,000 per year. All of the stores are rented by real estate companies who own the buildings. Currently the typical store brings in $325,000 of revenue per year. The typical variable costs needed to run a store in Bushville (paying for labor, buying material, etc.) are $210,000 year. a) What is the opportunity cost of running a store? Explain how you know this. b) Given this opportunity cost, what rent will the real estate companies charge? Explain. c) Suppose that a new highway brings more visitors to town, and stores on Central Square now brings in $472,000 of revenue per year with modest increase in variable costs to $236,000. What will happen to rents? Who will benefit – shop owners or the real estate companies?
For the equations below, q is the total number of units produced per day by m employees of a manufacturer, and p is the price per unit at which the q units are sold. Find the marginal-revenue product for the given value of m. q= 2 500m - m² 50 -, p = 0.8q +90; m = 70 The marginal-revenue product when m = 70 is. (Type an integer or a decimal.)
Suppose a firm has the following expenditures per day: $250 for wages and salaries, $50 for materials, $60 for equipment, and $40 for rent. The market wage for the manager is $120 per day but the owner-manager does not draw a salary. Assume the daily revenue is $420. What is the accounting profit for the firm described above? Just give equation formula.
Suppose that the production function for Hannah and Sam's home remodeling business is Q = F(L,K) Q = 10L0.1K0.4.Assume the wage rate is $8,000 per week and the cost of renting a unit of capital is $1,000 per week.a. What is the least-cost input combination for remodeling 400 square feet each week? Instructions: Round your answers to 2 decimal places. units of labor and units of capital. b. What is the total cost? Instructions: Round your answer to 2 decimal places. $ .revised jrl 08-11-2011
(a) For the cost function C(w1, w2, y) = 2y²w} w, calculate the Allen elasticity of substitution between the two inputs at the cost-minimizing input point (xf(w1, w2, y), a(w1, w2, y)). (b) Consider the production function f(r, y, z) = Vry + rz+ yz. Find the scale elasticity SE at (x, y, z) = (1,2, 3), (5, 1,6), (6, 6, 6) and determine if the pro- duction function is IRTS, CRTS, or DRTS locally at each point. (c) A profit maximizing firm in the market operates where the production exhibits decreasing return to scale (DRTS). Is this market in its long-run equilibrium? Justify your answer. (d) Suppose that there are the infinite number of potential firms that produce the identical output good y under the cost function C(y) = + 3. Assume free entry and exit. Find the long-run equilibrium output price p, the amount of the output that each firm in the market produces in the long-run equilibrium, and the value of profit that each firm earns in the equilibrium.
Use the table below to answer the next three questions. The below table displays the production schedule for Great Balls of Fire, a food truck that sells flaming meatballs. Great Balls of Fire has a lease on the truck itself that costs $1200 per week that must be paid whether or not the food truck produces and sells any meatballs. They may hire up to three workers to produce and sell the meatballs, workers cost $600 per week. The production schedule shows you how many meatballs would be produced with the varying levels of employees. Employees Meatballs Fixed Costs Variable Cost Total Cost Average Variab Cost 0 0 0 1 300 2 500 3 600 Completely fill out the table, please round all answers to the nearest cent. Do not enter any commas, dollar signs, or units (Ex. If your calculator says 12.376, just enter 12.38.) If your answer is an even dollar amount, you don't need to include the cents (Ex. you may enter 10 instead of 10.00)
Consider an airline's decision about whether to cancel a particular flight that hasn't sold out. The following table provides data on the total cost of operating a 100-seat plane for various numbers of passengers. Total Cost Number of Passengers (Dollars per flight) 40,000 10 60,000 20 65,000 30 68,000 40 70,000 50 71,000 60 72,500 70 73,500 80 74,000 90 74,300 100 74,500 Given the information presented in the previous table, the fixed cost to operate this flight is s At each ticket price, a different number of consumers will be willing to purchase tickets for this flight. Assume that the price of a flight is fixed for the duration of ticket sales. Use the previous table as well as the following demand schedule to complete the questions that follow. Price Quantity Demanded (Dollars per ticket) (Tickets per flight) 1,000 700 30 400 90 200 100
Problem 05-06 A firm's fixed costs for 0 units of output and its average total cost of producing different output levels are summarized in the table below. Complete the table to find the fixed cost, variable cost, total cost, average fixed cost, average variable cost, and marginal cost at all relevant levels of output. Instruction: Enter your responses for Average Fixed Cost (AFC) and Average Variable Cost (AVC) rounded to two decimal places. All other responses should be entered as whole numbers. If you are entering a negative number, use a negative sign (-) where appropriate. Q AVC ATC MC 150 300 75 200 H50 175 225 30 325 25 400 FC VC TC AFC 0 $ 15,000 0 100 15000 200 15000 300 15000 400 15000 500 15000 600 15000
Assume there is a linear isoquant where the input combination K = 10, L = 0 produces Q = 100. Assume that this isoquant has a MRTS (marginal rate of technical substitution) such that an increase in L by 1 unit requires the firm to give up – ½ unit of K. Assume PL = $1 and PK = $1. What is the smallest total cost necessary to produce Q = 100? $20 $10 $50 $100
Rent of a factory is the fixed cost for the firm True/False

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