Over the years, the market for instant noodles in Indonesia has developed into a duopoly market where two companies Indofood (Indomie – Firm 1) and Wings Food (Mie Sedaap – Firm 2) are competing. Nevertheless, as the first entrant, Indomie has created advantages which rendered it as the market leader. The inverse demand function for the market is P = 100 – 0.75(Q1+Q2), and the cost function for both Indomie and Mie Sedaap is identical and given by Ci(Qi) = 4Qi.

a. Under the above conditions, what is the market price for the instant noodles in Indonesia?

b. What are the quantity produced by each Indofood and Wings Food, and the total production in the market?

c. What is the profit for Indofood and Wings Food?

d. What would be the market price for instant noodles if there is no market leader and each firm makes an output decision under the belief that is rival will hold its output constant when the other changes its output level?

Fastspeed Couriers has experienced one of their toughest years yet. They are deciding whether to pay out R80 000 in accumulated cash in the form of an extra dividend to shareholders or embark on a share repurchase campaign. Current profits are R3.40 per share and the share sells for R36. Their abbreviated balance sheet before paying out the dividend is as follows:

Assets

Bank/Cash 100 000

Other Assets 280 000

Total    380 000

Equity & Liability

Equity 310 000

Debt 70 000

Total 380 000

Evaluate each alternative (i.e. pay the dividend or repurchase the shares) by:

1.1 Calculating the number of shares in issue. (2)

1.2 Calculating the dividends per shares (only for the first alternative, i.e. pay the dividend). (2)

1.3 Calculating the new share price. (4)

1.4 Calculating the EPS. (5)

1.5 Calculating the Price-Earnings ratio. (4)

I got the read-ahead package from the project staff. And I have a few questions.

Q#1 (100 points)   This table shows some of the info for the week.

20 sample M923’s were produced. It looks like the parts are in some kind of multiple per unit.

The first section shows the quantity of each part and the total cost. But doesn’t anybody think that I’d be interested in knowing the price for the part?

And I see the direct labor hours and the cost for those labor hours. But what is the average cost per dlh?

Same with overhead? I see that overhead is being driven by direct labor hours. And I can see the total cost for OH. But what is the OH rate?

Write a program in C to perform the following:

• Generates an array of 10 double random values between 1.0 and 100.0 – assume these are prices for 10 items that a store sells
• Generates an array of 10 integer random values between 0 and 200 – assume that these are the number of items/units (first array) sold
• Generate another array called “itemSale” which would contain the total sale for each item.
• Calculate the total sale for this store and display it
• If the number of items sold is more than 100, notify the user that this item (Item number from table below) needs to be reordered.
• Display the following table:

Item                 Price/unit         units sold         Total

1                      33.45               2                      66.9

2                      435.22             5                      2176.1

3                      55.12               100                  551.2

..                      …                    …                    …

____________________________________________

Total store sale: ??????

Requirement

1. Must use arrays
2. Must create a functions to generate random numbers for each array
3. Must use function to calculate the sale of each item
4. Must use appropriate loop to traverse the arrays

2. Suppose a production function is given by  F ( K , L ) = K 1 2 L 1 2, the price of capital “r” is $16, and the price of labor “w” is $16.
a. (5) What combination of labor and capital minimizes the cost of producing 100 units of output in the long run?
b. (5) When r falls to $1, what is the minimum cost of producing 100 pounds of pretzels in the short run? In the long run?
c. (5) When r falls to $1, will the cost of producing 100 units of output increase or decrease in the long-run? Explain.

3. A yoga classroom faces two demand curves. The demand by local residents is Q=100-0.5P, and the demand by nonlocal residents is Q=200-0.5P. The marginal cost of serving either local or nonlocal residents is constant at $100. If the yoga classroom practices third-degree price discrimination, it will charge local and nonlocal residents a price of _____ and _____, respectively.

a. $150; $250

b. $100; $200

c. $250; $350

d. $200; $300.

How many people will they serve if they charge the same for both?

How much profit increase do they have when they switch from uniform pricing distribution?

Suppose that land is specific to corn, capital is specific to automobiles, labor is mobile between sectors, and payments are as follows:
Automobiles: Sales revenue = 200; payments to labor = 100; payments to capital = 100
Corn: Sales revenue = 100; payments to labor = 40; payments to land = 60
Holding the price of automobiles constant, suppose the increase in the price of corn is 20% and the increase in the wage is 10%.
What is the impact of this on the income of land and the income of capital? What has happened to the real income of land? What has happened to the real income of capital? What has happened to the real income of labor?

Suppose a public referendum is being held on whether or not to levy a tax on cigarettes. Currently, the supply of cigarettes is given by Qs = -100 + 6P. You estimate the demand for cigarettes to be Qd = 200 - 2P.

You are asked to evaluate the likely effects of a tax on cigarettes equal to $10 per pack of cigarettes. Specifically, you are to file a report which predicts by how much this will reduce the amount of cigarettes sold. You are also asked to estimate the proportion of the tax that will be paid by the cigarette companies (sellers), and the proportion of the tax that will be paid by the smokers (consumers) of cigarettes.

To do this, you will first need to calculate the current price and quantity of cigarettes sold.

a) What is the equilibrium price and quantity of cigarettes?

Next you know from your economics class that you will need to know the price elasticity of

demand and the price elasticity of supply of cigarettes. (Note: for parts b-e, please leave your answers in the form of a fraction.)

b) What is the price elasticity of demand for cigarettes at the equilibrium price?

c) What is the price elasticity of supply of cigarettes at the equilibrium price?

Using your answers to b) and c), you are now able to determine what proportion of the tax will be paid by buyers, and what proportion of the tax will be paid by sellers.

d) What proportion of the tax will be paid by sellers?

e) What price will buyers pay after the tax is imposed?

f) What quantity of cigarettes will be sold after the tax??

Finally, a new proposal suggests that the tax should be levied on the cigarette companies instead of the smokers.

g) How should you respond to this proposal?

Two firms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest price. If both firms set the same price, they share the market equally. Costs are given by ??(??)=16??ci(qi)=16qi. Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40.

Answer the following:

a) (0.25 point) If Firm 1 chooses ?1=33p1=33, Firm 2's best response is to set what price?

b) (0.25 point) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price?

c) (1 point) If Firm 1 chooses ?1=7p1=7, Firm 2's best response is a range of prices. What is the lowest price in this range?

d) (1 point) Now suppose both firms are capacity-constrained: Firm 1 can produce at most 26 units, and Firm 2 can produce at most 45 units. If firms set different prices, consumers will first buy from the firm charging the lower price. Once that firm's supply is exhausted, consumers will buy from the firm charging the higher price until that firm's supply is exhausted. What is Firm 1's equilibrium profit?

You are considering two investments. Let X represent the proportional rate of return on the first investment, and let Y represent the proportional rate of return on the second investment. These are annual rates of return.

X is approximately normally distributed with mean 0.25 and standard deviation 0.2. Y is approximately normally distributed with mean 0.30 and standard deviation 0.4.

The first six questions are about the rates of return, X and Y.

What is the probability of a negative rate of return on the first investment?  

What is the probability of a negative rate of return on the second investment?  

If the rates of return on these investments are independent, what is the probability that the rates of return on both investments will be negative?

What is the expected amount by which Y exceeds X? HINT: The amount by which the rate of return on the second investment is higher than the rate of return on the first investment is Y - X.   

If the rates of return on these investments are independent, what is the probability that the second investment will have a higher rate of return than the first? HINT: Restate the question in terms of the rate of return on the second investment minus the rate of return on the first investment.  

If instead X and Y have a correlation of – 0.4 (a negative correlation), what is the probability that the second investment will have a higher rate of return than the first? HINT: Be careful! You’re given the correlation, not the covariance!  

The remaining questions are about the value of your portfolio after one year (the dollar amount you end up with), taking into account both the amount you invest and the yield, which depends on the rate of return. For example, if you invest $100, and the proportional rate of return is X, the yield is $100X, and you end up with $100 + $100X.

You have $100 to invest. Suppose you invest $100 in the first investment. What is the expected dollar amount you will end up with? (What is the expected value of your portfolio?)

What is the standard deviation of the dollar amount you will end up with?

What is the probability you will end up with less than $80?    

Alternatively suppose you invest $100 in the second investment. What is the probability you will end up with less than $80?  

Suppose you invest $30 in the first investment and $70 in the second investment. What is the expected dollar amount you will end up with?  

If X and Y are independent, what is the standard deviation of the dollar amount you will end up with?  

What is the probability you will end up with less than $80?  

Suppose instead that X and Y have a correlation of – 0.4 (a negative correlation). You invest $30 in the first investment and $70 in the second investment. What is the standard deviation of the dollar amount you will end up with?  

What is the probability you will end up with less than $80?