Question
In: Economics
2. The missing Monkey Poo Company is trying to determine how many poo fabricating machines to...
2. The missing Monkey Poo Company is trying to determine how many poo fabricating machines to buy for its factory. The of a new fabricating machine is 50 units of output, and the price of a one-year-old machine is 42 unit of output. These relative prices are expected to be the same in the future. The expected future marginal product of fabricating machines, measured in units of output, is 140-2K, where K is the number of machines in use. There are no taxes of any sort. The real interest rate is 8% per year:
a. what is the user cost of capital? Specify the units in which your answer is measured.
b. Determine the number of machines that will allow the company to maximize its profits.
c. Suppose that the company must pay a tax equal to 30% of its
gross revenue. What is the optimal
number of machines for the company?
d. Suppose that in addition to the 30% tax on revenue described in part (c), the firm can take advantage of a 20% investment tax credit, which allows it to reduce its taxes paid by 20% of the cost of any new machines purchased. What is the desired capital stock now? (Hint: An investment tax credit effectively reduces the price of capital to the firm.)
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
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The supervisor of a manufacturing plant is trying to determine how many of two parts, Part...
The supervisor of a manufacturing plant is trying to determine
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given in the following table.
Time required (Minutes/Unit)
Section 1
Section 2
Section 3
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Part X
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Part Y
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Lemington’sis trying to determine how many Jean Hudson dresses to order for the spring season. Demand...
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to order for the spring season. Demand for the dresses is assumed
to follow a normal distribution with mean of 400 and standard
deviation of 100. The contract between Jean Hudson and Lemington’s
works as follows. At the beginning of the season, Lemington’s
reserves x units of capacity. Lemington’s must take delivery for at
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An office supply company services copiers and tracks how many machines are serviced and the length...
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machines are serviced and the length of time (in minutes) for a
service call. The data below for 11 clients is below.
Sum X = 46 Sum Y= 234 Sum XY = 5797 Sum X2 =1180 Sum
Y2 =146608
1) Calculate SSYY, SSXX,
SSXY
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6) Interpret the coefficient of determination.
6)...
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