Assume that you are trying to determine the optimal contract length for your firm. You know the following information: Marginal Benefit of the Contract is fixed at: $981 Marginal Cost of the Contract is equal to: MC(L) = 126 + 5*L where L = length of the contract measured in months. What is the optimal contract length?
Assume that you are trying to determine the optimal contract length for your firm. You know...
Suppose the marginal cost of writing a contract of length L is MC(L) = 10 + 2L. Find the optimal contract length when the marginal benefit of writing a contract is: Instruction: Enter your responses rounded to two decimal places. a. MB(L) = 100. b. MB(L) = 150. c. What happens to the optimal contract length when the marginal benefit of writing a contract increases? It stays the same. It increases. It decreases.
You are a consultant who is advising a monopoly on the optimal pricing strategy. Your analysis has yielded the following information. The marginal cost (MC) is $3. The demand equation is P = 90 - 3Q The total cost (TC)is given by 35 + 3Q The marginal revenue (MR) is given by 90 - 6Q Based on this information, answer the following questions. Show FULL calculations! (a) Following the concepts of profit maximization, what is the profit maximizing quantity for this...
The graph presents the costs and revenue for a perfectly (purely) competitive firm, where the market price is equal to $600 per unit of output. This firm has a fixed cost equal to $3,600. Use this information to determine the optimal output and profit for this firm. What is the optimal output of this perfectly (purely) competitive firm? (Round your answer to the nearest whole number.) Cost and revenue $2400 2200 2000 1800 Average 1600 total cost Marginal cost Average...
2. Suppose the firm has the one variable production function Q=L?. Assume that the wage rate is w= 20 and that the firm has fixed costs of 10. Finally, assume that the firm is a price taker and the market price is 2. a) Show that this production function exhibits increasing returns to scale. Show that the marginal product of labor is increasing. Illustrate the production function. Is it convex, concave or neither? b) Find the variable and total cost...
3. Optimal Production under Uncertainty. Assume a firm owner is an expected utility maxmizer and has VNM utility function u(x) = In () where x is final wealth. She has initial wealth of w, a constant unit cost of production, c = 5, and fixed costs of co = 2. She faces a maximum production capacity of y = 20. (a) The output price is uncertain: with probability p=.5 the price is 3 and otherwise the price is 9. What...
3. Optimal Production under Uncertainty. Assume a firm owner is an expected utility maxmizer and has NM utility function u(x) = ln(x) where x is final wealth. She has initial wealth of w, a constant unit cost of production, c = 5, and fixed costs of co= 2. She faces a maximum production capacity of y = 20. (a) The output price is uncertain: with probability p= .5 the price is 3 and otherwise the price is 9. What is...
Assume that the cost function for a firm is equal to C(Q) = 1000 + 5Q + 10Q2 and the Marginal Cost function is MC(Q) = 5 + 20Q. What is the level of fixed cost when production is equal to 100? 200? What is the level of variable cost when production is equal to 100? 200? What is the level of Average Fixed Cost when production is equal to 100? 200? What is the level of Average Variable Cost...
You are a business manager at a monopolistically competitive firm. One of your newly hired workers wants to know the following. (Please use the MR MC approach in your answer.) What are the steps required to determine the optimal level of output? What are the steps required to determine the price that corresponds to that optimal level of output? What are the steps required to determine if the firm has achieved maximum profits? What are the steps required to determine...
MC ATC Question 5. Assume this firm is trying to maximize Profit under Perfect Competition. How much is its Profit or Loss? Show your solution. I Price and Cost (dollars) -dz, MR AVC Quantity (c) Case 3
Hello, this is a Micro Economic problems Could you please be kind enough and solve all of problems with the explanation in detail? Thank you and have a good one! 1. Suppose a firm has market power and faces a downward sloping demand curve for its product, and its marginal cost curve is upward sloping. If the firm reduces its price, then: A) consumer and producer surplus must increase. B) consumer surplus increases, producer surplus may increase or decrease. consumer...