Lee is a rational consumer with complete health insurance (no copayments or deductibles). He will use medical care up to the point at which his: total benefit is equal to the cost of care paid by the insurance provider, OR marginal benefit is zero? Or maybe he will use medical care up to the point his marginal benefit is equal to the marginal cost of care paid by the insurance provider, OR total benefit is equal to zero?

The normal scrap loss for four successive operations is 5%, 3%, 15% and 10% respectively. How many units should be started through in order to finish with 1,200 pieces? Find:

a) The total machine time needed if the operation times are 3, 6, 4, and 5 minutes, respectively.

b) The total cost if the cost per unit for each successive operation is $2, $5, $3, and $1, respectively.

A perfectly competitive market exists for wheat. The inverse demand is P = 100-Q
where P is the price of wheat and Q is the total quantity of wheat. The private total cost for
the unregulated market to produce a quantity of Q is 50+80Q +0.5Q^2. The production of
wheat creates some pollution where the total externality cost is EC =Q^2.

Task 1: Solve for the free market competitive equilibrium of wheat.

Task 2: Solve for the socially optimal level of wheat. Illustrate it in the graph.

Task 3: Derive the Pigouvian tax (per unit of output of wheat) that results in the social optimum..

Task 4: One big company, WheatsRUs, buys out all the farmers of wheat and becomes
a monopolist. Using the same demand and cost information, solve for the quantity and
price under the unregulated monopolist.

A perfectly competitive market exists for wheat. The inverse demand is P = 100?Q where P is the price of wheat and Q is the total quantity of wheat. The private total cost for the unregulated market to produce a quantity of Q is 50+80Q +0.5Q 2 . The production of wheat creates some pollution where the total externality cost is EC = Q 2 .

Task 1: Solve for the free market competitive equilibrium of wheat.

Task 2: Solve for the socially optimal level of wheat. Illustrate it in the graph.

Task 3: Derive the Pigouvian tax (per unit of output of wheat) that results in the social optimum.

Task 4: One big company, WheatsRUs, buys out all the farmers of wheat and becomes a monopolist. Using the same demand and cost information, solve for the quantity and price under the unregulated monopolist.

a) Find ABC’s average fixed costs, average variable costs, average total costs and marginal costs.

b) Since ABC is charging the customers at the price of $50, it seems that the company cannot make a profit. The owner decides to shut down operations. What are ABC’s profits/losses? Should the owner shut down operations? Explain.

c) Economic adviser suggested that it is better to produce unit of output, because marginal revenue equals marginal cost at the quantity. What are the ABC's profit /losses at the level of production? Was this the best decision? Explain.

Cost of Units Transferred Out and Ending Work in Process

The costs per equivalent unit of direct materials and conversion in the Rolling Department of Kraus Steel Company are $1.80 and $2.70, respectively. The equivalent units to be assigned costs are as follows:

Equivalent Units

Direct MaterialsConversion

Inventory in process, October 10 2,900

Started and completed during October48,000 48,000

Transferred out of Rolling (completed)48,000 50,900

Inventory in process, October 316,000 3,600

Total units to be assigned costs54,000 54,500

The beginning work in process inventory on October 1 had a cost of $1,650. Determine the cost of completed and transferred-out production, the ending work in process inventory, and the total costs assigned by the Rolling Department.

Completed and transferred-out production$

Inventory in process, October 31$

Total costs assigned by the Rolling Department$

Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm’s total cost is given by the equation. TC = 100 + q^2 + q where q is the quantity of output produced by the firm. You also know that the market demand for this product is given by the equation P = 1000 - 2Q where Q is the market quantity. In addition, you are told that the market supply curve is given by the equation P = 100 + Q

a. What is the equilibrium quantity and price in this market given this information?

b. What is the firm’s MC equation?

c. What is the firm’s profit maximizing level of production?

d. What is the total revenue?

e. What is the total cost?

f. What is the profit at this market equilibrium?

Mozart Music Inc. makes three musical instruments: trumpets, tubas, and trombones. The budgeted factory overhead cost is $3,469,400. Factory overhead is allocated to the three products on the basis of direct labor hours. The products have the following budgeted production volume and direct labor hours per unit:

a. Determine the single plantwide factory overhead rate.
$ per direct labor hour

b. Use the factory overhead rate in (a) to determine the amount of total and per-unit factory overhead allocated to each of the three products.

Please refer to the following incomplete data describing costs and revenues for a monopolistic firm. Assuming that this firm wants to maximize profits, which of the following most accurately describes the price should it charge for this good? Output Price Total Revenue Marginal Revenue Total Cost Marginal Cost Average Total Cost 0 $100 $0 na $50 na na 1 $90 $90 $90 $65 $15 ? 2 $80 $160 ? $75 ? $38 3 $70 $210 ? $95 $20 $32 4 $60 $240 $30 $125 ? $31 5 $50 $250 $10 $175 ? ? 6 $40 $240 -$10 $265 $90 $44 7 $30 $210 ? $415 $150 $59 $30 $50 Less than $30 more than $50