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Eco 550 Exercise Ch9 Ch10

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Eco 550 Exercise Ch9 Ch10
Chapter 9
Exercise 3.
a. long-run variable cost
AVC=VC/Q
VC=AVC*Q=(1.24+0.0033Q+0.0000029Q^2-0.000046QZ-0.026Z+0.00018Z^2)Q=1.24Q+0.0033Q^2+0.0000029Q^3-0.000046Q^2Z-0.026QZ+0.00018QZ^2 b. long-run marginal cost
TC=FC+VC
since this is long-run marginal cost, there is no FC
So TC=VC
MC=TC/Q
MC=VC/Q=1.24Q+0.0033Q^2+0.0000029Q^3-0.000046Q^2Z-0.026QZ+0.00018QZ^2/Q=1.24+0.0033Q+0.0000029Q^2-0.000046QZ-0.026Z+0.00018Z^2 c. if holding plant size constanct at 150000 kilowatts, short-run AVC function is
AVC=1.24+0.0033Q+0.0000029Q^2-0.000046QZ-0.026Z+0.00018Z^2=1.24+0.0033Q+0.0000029Q^2-0.000046Q*150000-0.026*150000+0.00018*150000^2
short-run MC function is
MC=1.24+0.0033Q+0.0000029Q^2-0.000046QZ-0.026Z+0.00018Z^2=1.24+0.0033Q+0.0000029Q^2-0.000046Q*150000-0.026*150000+0.00018*150000^2

d. SAVC=1.24+0.0033Q+0.0000029Q^2-0.000046QZ-0.026Z+0.00018Z^2=1.24+0.0033Q+0.0000029Q^2-0.000046Q*150000-0.026*150000+0.00018*150000^2 e. MC=0.0033+2*0.0000029Q-0.000046*150000-0.026*150000+0.00018*150000^2
Exercise 4
a. Break-Even point is when TR=TC P*Q=F+V*Q
If foreign competition's increased, sales will be reduced for this firm. So if this firm reduce the price, break-even point will be increased. b. If this firm's direct labor costs are increased, the break-even point is also inceased. c. If thie firm installs new ventilating equipment as OSHA requires, the break-even point will be increased also.
In order for this firm to loss from break-even point is increased, total revinue has to be increased by selling more products.
Exerceise5
z=(Qb-Qhat)/σ (standard deviation)
Qb= 33000
Qhat= 40000 σ= 4000 z= -1.75 if find the -1.75 from the table 'value of standard normal distribution function', it is 0.0401
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