Chapter 12_version1

Question 3. (a) A retail company has a marginal profit curve given by: MP = -2Q² + 160Q + 2145. Determine the level of production, or range of production at which the company will have: (i) Increasing returns (ii) Decreasing returns (iii) Negative returns (iv) Its maximum profit

20) This decision tree represents the expected profits and the standard deviations associated with three decisions facing a mobile phone producer (All figures are in millions of dollars). The root node (the one on the left) represents the decision of whether to produce the phones in China or North America. The second pair of nodes represent the decision of whether to market the phones in China or North America; and the final nodes represent the choice of selling price: if the phones are sold in China, they will be sold for either $30 or $40, whereas if they are sold in North America, they will be sold for either $40 or $50. Based on the calculated values, what is the company's best strategy? Mean $30 1.250, sd 750 Sell China $40 Mean 375, sd = 625 Make in China Mean= -1,000, sd = 1,500 $40 Sell NA S50 Mean =-1,500, sd = 1,250 Sell China $30 $40 Make in NA Mean 1,250, sd.- 2,137 Sell NA $40 S50 Mean --250, sd-1.639

Assume you are an engineer working for a chemical production company. You are on the technical team that is responsible for deciding what to do about the dangerous chemical that your company is using to produce its best-selling chemical product. Recent reports have just made known the dangers of this chemical, and the company now needs to decide how to proceed. There are several options to consider: stop producing the harmful product altogether and take a hit on total profits; continue to make the product and sell it, like nothing's wrong, since the federal government has not cracked down. You could also spend money and engineering efforts in R&D to develop a safe chemical that would take its place. There is no guarantee that this would happen any time soon, but the scientists think it is realistically possible. To make matters worse, your biggest competitor produces this harmful product off-shore and is not hampered by the US regulations. If you stop producing this product…

Acme Drug Co. has a patent on the drug A-rene, the annual demand for which can be described by the demand curve: Q = 4500 - 300P. Production of the drug requires an annual fixed cost of $3,000 and a per unit marginal cost of $5. (i) How many units of the drug will Acme produce each year, and what price will it charge, in order to maximize its profits? What will be its annual profits? (ii) Now suppose that the Better Drug Co. has discovered B-rene, a new drug which seems to be identical to A-rene in all its effects. If Better enters the market, competition with Acme will conform to a Cournot duopoly. Better’s costs are identical to those of Acme. What would be the equilibrium outcome of this duopoly? Specifically, how much would each firm produce and what would be the price? How much profit would each firm make? Would Better find it profitable to enter the market? (iii) Would it be in the interests of society as a whole for Better Drug to enter into production? Identify the gainers and…

You are managing a competitive corn farm that faces random demand. You must decide how much corn to produce before observing the actual price. As the 2 adjacent figure shows, the price will be $12 or $6 per bushel. The probability the price will be $12 is and the probability that the price will be $6 is - Your MC 3 3 $14 marginal cost curve is also included in the figure. PH=MRH $12 The quantity of corn that maximizes expected profit is bushels. $10 (Carefully enter your response considering the units on the axes of the given figure.) S8 The quantity you would produce if you knew the actual price was $12 is bushels. L= MRL The quantity you would produce if you knew the actual price was $6 is bushels $6 Suppose you produce the quantity of corn that maximizes expected profit, compared to what you would produce if you knew the actual price before producing. $4- The amount of profit lost if the actual price is $12 is $ The amount of profit lost if the actual price is $6 is $ (Enter a…

2. A company produces and sells a consumer product and is able to control the demand for the product by varying the selling price. The approximate relationship between price and demand is 2,700 5,000 p = $38 + D for D >1 D2 where p is the price per unit in dollars and D is the demand per month. The company is seeking to maximize its profit. The fixed cost is $1,000 per month and the variable cost (c,) is $40 per unit. a. What is the number of units that should be produced and sold each month to maximize profit? b. Show that your answer to Part (a) maximizes profit.

W7 Q5 A paper published in the Harvard Business Review points out a new way to calculate economic profit that could be more appropriate for service firms and other people-intensive companies. Instead of focusing on investment and return on investment, the focus is on employee productivity, in terms of both generating revenues and reducing costs.   The approach is to first determine economic profit in the conventional way, except that we ignore taxes, so that economic profit is before tax, as follows:   Economic profit = Operating profit − Capital charge   Assume the following information for a hotel chain that wishes to adopt the new method. The firm has $100 million in operating profit, has $1 billion in investment, and uses a cost of capital rate of 5%, so the capital charge is $50 million and the economic profit is $50 million. Relevant calculations are contained in Part 1 of the following schedule:   Part 1: Economic Profit (in thousands, except cost of capital rate)   Revenue…

Question 2 Mean reversion of profits for competitive industries suggests that Group of answer choices A. when there are profits, the competition of new firms will reduce that profit; and when there are losses, firms going out of business will reduce profits for businesses that remain B. when there are profits, the competition of new firms will reduce that profit; and when there are losses, firms going out of business will increase profits for businesses that remain C. profits will tend to increase over time D. when there are profits, the competition of new firms will increase that profit; and when there are losses, firms going out of business will reduce profits for businesses that remain Question 3 Mohammad is an accounting major. Upon graduation, he is not sure if he should accept a job offer in accounting from a bank or a law firm. He wants to work in whichever industry expected to have higher profits so he can earn a higher income. According to the indifference principle, Group of…

ect of the utility commission's ruling on the profitability of the firm? 15 A company estimates that the demand for its product fluctuates with the price it charges. The demand function is q = 280,000 – 400p where q equals the number of units demanded and p equals the price in dollars. The total cost of producing q units of the product is estimated by the function C = 350,000 + 300q + 0.0015q? (a) Determine how many units q should be produçed in order to maximize annual profit. (b) What price should be charged? (c) What is the annual profit expected to equal? 16 Solve the previous exercise, using the

Refer to the figure below to answer the following questions p = mr 0 1.5 2.5 me atc ave 15. How much should this firm produce in order to maximize profits? (a) 0 (b) 1.5 (c) 2.5 (d) There is not enough information to answer the question (a) π = 0 (b) = -fc (c) π => 0 (d) There is not enough information to answer the question 16. What level of economic profit, 7, will this firm be earning at its profit-maximizing quantity of output?

Suppose that you are trying to make a decision regarding the purchase of a new machine for the plant that you are working on. You have three criteria to consider. First of all, in these hard times, the price of the machine is very important for you. On the other hand, the throughput rate is also very important for you since you are anticipating higher demand in the future and you should have enough production to satisfy the customer demand. Finally, energy consumption is an issue that your company is sensitive to not only for the cost issues but also green production seems to be very important particularly for your customers. You have decided to adopt the additive utility function for the overall utility from these three criteria. Thus, the next thing for you is to determine the relative weights of the criteria. Suppose you used Swing Weighting and obtained the following table as the result of the process. What is the weight of the price?

5. The profit function for a firm is P(x) = -4.5x2 + 36000x – 45000 Where P is the profit stated in dollars. a) Determine the number of units x which will result in maximum profit? b) What is the expected maximum profit?

A business has spent $50 million dollars on development of a new laptop. It must spend an additional $20 million to bring the finished computer to market. What are the minimal acceptable returns (after spending $50 million) for management to bring the new laptop to market? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Any amount over $20 million. b Any amount over $50 million. c Any amount over $70 million. d The value, if any, of the results of the $50 million spent so far. e The value, if any, of the results of the $50 million spent so far, plus the $20 million. Typed and correct answers please.

plans are underway for a new stadium for a baseball team. City officials question the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may purchase a box for $300,00. The fixed construction cost for the upper deck area is estimated to be $4,500,000, with a variable cost of $150,000 for each box constructed.  a. what is the expected profit of building 50 luxury boxes

It costs $1 million in R&D to develop a new diabetes treatment.  The marginal cost of producing and marketing a treatment, once discovered, is $10.  Suppose that Pfizer currently is selling a treatment that is covered by a valid patent, which is set to expire in one year.  What is the most likely outcome of a proposed law that would allow generic drug companies to enter any market 5 years before the expiration of the patent covering it? Question options:   a)  More diabetics would use the treatment Pfizer invented, and drug companies would invest more in R&D for future treatments   b)  Fewer diabetics would use the treatment Pfizer invented, and drug companies would invest more in R&D for future treatments   c)  More diabetics would use the treatment Pfizer invented, and drug companies would invest less in R&D for future treatments   d)  Fewer diabetics would use the treatment…

You are the CEO of a company. You have an opportunity to undertake the following project: pay $1,000 today and receive $1,300 a year from now. If the interest rate is 30%, the net gain of the project (cost minus benefit) is:     A) $440.   B) $200.   C) $166.   D) $0.

110 3025 The profit function of a company is P(x) =÷x* ex², the output %3D that maximizes the profit is Select one: а. b. 55 С. 110 d. 600 е. 3025 f. None of the above

Read the following article, which introduces the concepts of expected value and optimal decision making. Then answer the question that follows. EXPECTED VALUE AND OPTIMAL DECISION MAKING, BY THE APLIA ECONOMICS CONTENT TEAM As an alternative to raising property taxes in order to increase revenue, the village of Port Chester, New York, recently increased parking meter rates by 25% and also raised parking fines. According to an article from the lohud.com news site (Gabriel Rom, "Port Chester Increases Parking Costs, Fines," lohud.com, May 2, 2017), officials are hoping that the increased parking costs will yield an additional $500,000 in revenue for the village. Although in the past drivers may have been more willing to risk parking illegally, the optimal behavior for Port Chester drivers may have changed as the cost of a ticket has risen. Undoubtedly, some motorists will continue to take certain "gambles," perhaps risking a ticket for illegal parking in exchange for the benefit of saved…

An entrepreneur named Khadijah has total revenue shown by the equation TR = 150Q - 5Q² and total costs shown by the equation TC = 20 - 10Q. Determine the amount of output that must be produced by Khadijah to get the maximum profit and what is the maximum profit from that amount of output. Prove that the value obtained is the maximum!

Question An incumbent firm Pilly has a product that works well but has the possibility of causing side-effects to users. Both Pilly and an upstart firm Smirck are having the opportunity to develop a new product without the side effects. The following table shows the expected net return (after considering R&D costs, probability of success in product development, and future profits) for each firm under different scenarios. Smirck Invest Smirck Not Invest Pilly: $2.4 m Smirck: -$0.1 m. Pilly Invest Pilly: $4.9 m Smirck: $0 Pilly Not Invest Pilly: $3 m Smirck: $0.4 m Pilly: $5 m Smirck: $0 Assume that the two firms simultaneously choose whether to invest or not. What is the Nash Equilibrium of this game (that is, the action choices of the two firms in the Nash Equilibrium)? Would your answer be different if Pilly is the first mover and commits to its choice before Smirck makes its response (that is, a sequential-move game)? Equilibrium in the simultaneous-move game (No need for…

Question 1.05 Assume a firm sells an album for $25 per copy. The firm must pay $6 in royalties and $9 in production costs for each album. If 60 copies are sold, how much profit (value capture) was the firm able to make? Answer:

ANSWER TRUE OR FALSE: No need for long explanation. 1. The long run economic profit will remain positive if there are high barriers to entry. 2. The success of a collusive agreement declines with the increase in the number of members. 3. If the Net Present Value of the expansion project is positive, this means that it is advantageous to expand.

Two companies must collaborate to develop a new product. They must choose between two products, product A or product B. While Company ABC has a patent for product A, Company XYZ has a patent for product B. If a product gets developed, the company without a patent must pay licensing fees of $200K. The companies' profits (in $1000) are as follows: Table 2: Product Innovation ABC Product A Product B XYZ Product A Product B 300,100 0,0 1. What are the equilibria in pure strategies? 2. Which basic game does it resemble? 0,0 100,300

D2) Economics A company in a free competition market has marginal costs given by MC (Q) = 50 + 3⋅Q where Q is the quantity. If the price in the market is 200, what will be the contribution margin for optimal adaptation for the company? (Answer with an integer)

A company is using break-even analysis to determine how many units of a new product must be sold for the product to be profitable. Which of the following actions will cause the break-even point of a product to increase? a. Reduction in the purchase price of the equipment needed to produce the product b. Reduction in the per unit production cost of the product c. Reduction in the sales price of the product d. All of the answer choices are correct.

Final output in the economy is pro- duced using capital K and labor L. The production function is: Y = ĀK/ L^/5 Assume that the supply of all inputs are exogenous and equal to L and K. Perfectly compet- itive firms are price-takers and choose how much capital and labor to demand by maximizing profits. Let w and r denote the wage and rental rate of one unit of labor and capital respec- tively.

Suppose we know that p=1,056- D/5, where p: price in dollars and D = annual demand. The total cost per year can be approximated by $1,000 + 2D². a. Determine the value of D that maximizes profit. b.Show that in part(a) profit has been maximized rather than minimized. c. Find the maximum profit

The global pandemic 2020 has promoted a race to capture the market for introducing effective vaccine and treatments. A) If PFIZER is the sole vaccine provider given the following information, answer the questions below:                                                                                     Output Price/Unit Total Cost 1 5500 1000 2 5000 1200 3 4500 1500 4 4000 2500 5 3500 4000 6 3000 5700 7 2500 7500 8 2000 9400 9 1500 11400 10 1000 13500 (i) Given the tabular information above find the profit-maximizing output and price also illustrate the same using the two-dimensional labeled diagram. Show the calculation as well.                                                   B) Assume if many firms enter into the business of providing vaccine determine: (i) How the demand curve of PFIZER would change and how it would now maximize its profit? The kind of market structure now PFIZER is forced…