...................................................................................................5 Perishable Inventory...............................................................................................................5 Low Marginal Servicing Costs................................................................................................5 Advance Sales .......................................................................................................................5 Uncertain
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for DRAM manufacturing. Your facility has a maximum capacity of 10 million chips per year. Your cost of funds is 10% per year for either borrowing and investing. You could sell the land‚ plant and equipment today for $8 million; you estimate that the land‚ plant‚ and equipment will gain 6% in value over the coming year. (Use a one-year planning horizon for this problem.) In addition to the cost of land‚ plant‚ and equipment‚ you incur various operating expenses associated with DRAM production
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the price Intel sets. The market willingness to pay for the P80 chip is given by= 400 − Q‚ with p in dollars p F per chip and Q in thousands of chips per month. The fringe marginal cost curve is MC= 40 + .5Q F (with Q F and MC F also in thousands of chips and dollars per chip‚ respectively)‚ and Intel’s marginal cost of producing chips is constant at $50 per chip. Intel is planning its strategy to set the P80 chip price. (a) Determine the residual demand Intel faces after accounting for the
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BEO2264 MICROECONOMIC ANALYSIS TUTORIAL QUESTIONS TOPIC 1 Question 1 (a) Discuss how microeconomic theory can help to explain the effects of lowering the minimum wage for teenage employees in the retail industry (b) How is the usefulness of a theory evaluated (c) “Observation without theory and theory without observation are equally useless in explaining the complexities of the real world”. Discuss. Question 2 (a) Distinguish between positive analysis and normative analysis.
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Question 1 A. Identify each of the following as either a positive or a normative economic statement: a. The high temperature today was 37 degrees. b. It was too hot today. c. Other things being equal‚ higher interest rates reduce the total amount of borrowing. d. Interest rates are too high. B. In order to attract Muro John to the position of CEO of GMO Tz Seed Company Inc. Muro is given the following package (a) a signing bonus of $200‚000. (b) In addition to his salary Muro will be paid
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course website (Review sessions section). CHAPTER 7 1. Definition of costs: explicit‚ implicit‚ opportunity cost‚ sunk/nonsunk‚ long run‚ short run. 2. Isocost line. a. How to represent it algebraically. b. How to represent it graphically? Solve for K. c. Vertical and horizontal intercept. Slope is the input price ratio. 3. Cost-minimizing bundle: combination of labor and capital that minimizes the firm’s total cost. a. Tangency condition between the firm’s isoquant and isocost. b. A given
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OS refers to where the firm is on the frontier (cost leadership vs. high quality product) (b) If cost leadership and differentiation (creation of customer value) are the two main strategies available to firms in your industry‚ what determines your own organization’s best strategy? The requirements for a firm in using cost leadership differ from those of a firm using differentiation. In order for a firm to successfully pursue a strategy of cost leadership‚ it must have skills and resources such
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percentage as the price change; d. *do not change when the price of the good decreases. 1 5. Suppose that‚ in a perfectly competitive market with a generic market demand‚ all firms active in the market are operating under a constant marginal cost. Concerned about overconsumption of the product‚ the government has decided to increase the price by $3 and is contemplating on introducing a specific sales tax whose statutory duty is on sellers or a price floor. a. b. c. d. The deadweight
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the diagram below. Here there is no single level of output at which the firm can make profit because ATC is always above AR (Total cost will always be above total revenue). The profit maximizing level is MR=MC this is at output 0Q. The total revenue is output 0HGQ and the total cost 0BFQ with the size of the loss of the firm HBFG. The only way for the firm to make a profit is to charge each individual consumer at the exact price they are willing to pay.
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Diagram Normal profit is defined as minimum profit required for the firm in the market or the situations where the firm’s total cost equal the total revenue (TC=TR). It is also known as zero profit or breakdown profit. The condition to attain the normal profit is when the price equilibrium is equal to the marginal cost‚ marginal revenue‚ average cost and minimum average cost (P=MC=MR=AR=min AC). As a conclusion‚ a firm which attains normal profit will not leave the
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