At its present level of output of 100 units, a perfectly competitive firm discovers that (i) its total fixed costs are $200 and (ii) its marginal cost is $7 and equal to average total cost. At an output level of 50 units, marginal cost is $4 and equal to average variable cost. The price of the commodity being produced is $6.

If the firm wishes to maximize total profits, what should the firm do?

A) increase output.

B) decrease output.

C) increase price.

D) continue to produce the current level of output.

Data for Cullumber Company is given below:

a. Cullumber Company has a beginning inventory in year one of $1,355,000 and an ending inventory of $1,650,000. The price level has increased from 100 at the beginning of the year to 110 at the end of year one. Calculate the ending inventory under the dollar-value LIFO method.

b. At the end of year two, Cullumber's inventory is $1,863,000 in terms of a price level of 115 which exists at the end of year two. Calculate the inventory at the end of year two continuing the use of the dollar-value LIFO method.

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A). The government needs revenue. It decides to tax lemon pie sales by 20%. Jimmy is a fan of lemon pies. He has an income of 100 pence. The price of lemon pies is 5 pence, the price of mascarpone pies is 4 pennies. Jimmy's utility is U=(lp)^2/3(mp)^1/3. How much revenue will the tax generate?

B). The tax on lemon pies is a burden on Jimmy. How big of a burden is it? Calculate the income increase that would be required to compensate Jimmy for the imposition of the tax. How does this compare to the revenue raised from the tax?

Substitution and Income Effect (Calculation)

Suppose that the consumer's utility function is Cobb-Douglas U(x; y) = xy. She initially has $100

income and the prices that she faces are px = py = $2:

a. Compute her demands for x and y.

b. Now suppose that px decreases to $1 while py remains unchanged. Compute her new demands for x

and y.

c. What is the total (price) effect on the consumption of x?

d. What is the substitution effect (SE) and income effect (IE) due to the price change?

Question 2 - Calculate the yield to maturity of the following bond with a par value of $1,000 that pays a 3.9% coupon semiannually. The bond was settled on Jan 1, 2010 and matures on Jan 1, 2032. It currently trades at a price of $972.84 (5 points)

Coupon Bond YTM

settlement date: 01/01/2020; maturity date: 01/01/2032; coupon rate: 3.9%; coupons per year: 2; face value (% of par): 100; Bond price (% of par): $972.84.

What is the YTM?

Please show work on Excel. Thank you!

An analyst gathered the following data about stocks J. K. L which together form a value
weighted index:
December 31, Year 1 December 31, Year 2
Stock Price Shares
outstanding
Price Shares
Outstanding
J 50 10,000 $60 10,000
K 40 8,000 $30 16,000
L 50 12,000 $40 12,000
Calculate the ending value-weighted index (base index = 100), and briefly explain what it means.
Provide your answer up to 2 decimal points.

Suppose one Japanese firm and one American firm dominate the US market of widgets. They share the same cost structure: TC = 250 + 40q. The only demand for widgets is in the US and is p = 100 – Q.

(a) If these two firms compete in quantity at the same time, what is the Cournot equilibrium output, price, profit level by each firm?

(b) Suppose the American firm acquires the Japanese firm and therefore becomes a monopoly in this market. Calculate the monopoly’s output, price, and Lerner Index. How much is the deadweight loss due to monopoly behavior?

2. Randy consumes two goods: X and Y.  Randy’s preferences over consumption bundles (X,Y) are summarized by the utility function:

u (X,Y) = X³Y.

1. Write algebraic expressions for Randy’s demand functions for goods X and Y to be

2. If P_X= 1, P_Y= 1, and m = 100, what would be Randy’s optimal consumption of goods X and Y?

3. Suppose now that the price of X rises to 3, while the price of Y and income remain unchanged.  What is Randy’s new optimal consumption bundle?

4. Calculate the equivalent variation.