ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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A company produces at most 15 (thousand) widgets per year. Its profit P, in thousands of dollars, is a function of n, the number of widgets prouduced per year( in thousands of widgets) the marginal profit is given by dp/dn = 20 + n -n^2.
A. What is the marginal profit if n= 3 ( thousand widgets) should the company increase or decrease production
B. What is the marginal profit of n= 8 ( thousand widgets) should the company increase or decrease production
C. How many widgets should the compay proudcue in order to maximize
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- 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 100arrow_forwardSuppose that the Acme Gumball Company has a fixed proportions production function that requires it to use two gumball presses and one worker to produce 1,000 gumballs per hour. a. Explain why the cost per hour of producing 1,000 gumballs is 2v + w (where v is the hourly rent for gumball presses and w is the hourly wage). b. Assume Acme can produce any number of gumballs they want using this technology. Explain why the cost function in this case would be TC = q(2v +w), where q is output of gumballs per hour, measured in thousands of gumballs. c. What is the average and marginal cost of gumball production (again, measure output in thousands of gumballs)? (show the complete formula) Draw the graph for the average and marginal cost curves for gumballs assuming v=3, w-5 (show working) Now draw the graph for these curves for v=6, w=5.( show working) Explain why these curves have shifted.arrow_forwardTo produce the next popular toy, a company has to pay a factory $250, 000 to set up the production line. They also have to pay $25 per item for the raw materials and labor. Write function for the average cost to produce x items. Then describe what happens to the average cost as the factory produces a large number of toys.arrow_forward
- Is it true that if a firm’s technology exhibits the decreasing return to scale, then average production cost is increasing? (If yes, show the proof. If not, show a counter example)arrow_forwardIntroduction to Calculus in Economics (continued): In the previous Problem Set question, we started looking at the cost function C (æ), the cost of a firm producing z items. An important microeconomics concept is the marginal cost, defined in (non- mathematical introductory) economics as the cost of producing one additional item. If the current production level is æ items with cost C (z), then the cost of computing h additionial (C(z+h)-C(z)) items is C (z + h). The average cost of those h items is . As we analyze the cost of just the last item produced, this can be made into a mathematical model by taking the limit as h → 0, i.e. the derivative C' (z). Use this function in the model below for the Marginal Cost function MC (x). Problem Set question: The cost, in dollars, of producing z units of a certain item is given by C (z) = 0.02a3 – 10z + 450. (a) Find the marginal cost function. MC (z) (b) Find the marginal cost when 50 units of the item are produced. The marginal cost when 50…arrow_forwardFor its current level of production, a firm is attempting to minimize its costs. The firm has determined that the marginal product of labor is 10, the marginal product of capital is 20 and the cost per unit of labor is $5, whereas the cost per unit of capital is $10. To minimize cost for the given output the firm should Increase the amount of capital and decrease the amount of labor Leave the amount of capital and labor as they are Decrease the amount of capital and increase the amount of laborarrow_forward
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