68.

Assume that the following conditions exist for a perfectly competitive firm:
price = $10, current output = 100 units/hour, ATC at current output = $9.00, AVC at current output = $8.00 and MC at current output = $8.00.
a. Is the firm earning any economic profit currently? How much is its profit or loss?
b. Is the firm maximizing its economic profit? How do you know? What should the firm do to maximize profit? Should it increase or decrease output?
c. Given your answers in part b, how will the market adjust to reach long-run equilibrium? What will happen to the economic profit in the long-run? Include appropriate graphs for the market and the typical firm in your explanation.

26) During March, a firm expects its total sales to be $169,000, its total variable costs to be $95,900, and its total fixed costs to be $25,900. The contribution margin for March is:

Multiple Choice

$73,100.

$25,900.

$47,200.

$121,800.

$95,900.

25)

Forrester Company is considering buying new equipment that would increase monthly fixed costs from $240,000 to $627,000 and would decrease the current variable costs of $60 by $15 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $600,000 and current break-even units are 6,000. If Forrester purchases this new equipment, the revised break-even point in dollars would be:

Multiple Choice

$330,000.

$763,636.

$1,140,000.

$436,364.

$600,000.

Profit-maximizing Q (quantity) and P (price)

will you get a different Q and P if you use equations 2 and 4 vs. equations 2, 3, and 5?

(1) Demand: Q = 230 – 2.5P + 4*Ps + .5*I, where Ps = 2.5, I = 20.

(2) Inverse demand function [P=f(Q)], holding other factors (Ps = 2.5 and I =20) constant, is, P=100-.4*Q.

(3) Production: Q = 1.2*L - .004L2 + 4*K - .002K2;

(4) Long Run Total Cost: LRTC = 2.46*Q + .00025*Q2 (Note: there are no Fixed Costs);

(5) Total Cost: TC = 1*L + 10*K.

The table below shows the short-run production and cost schedule of a blueberry farm that operates in a perfectly competitive market. Suppose that the prevailing market price is $4 per pack.

(a) What is the fixed cost?

(b) What is the marginal revenue?

(c) What is the marginal cost when the farm increase its production quantity from 60 to 70?

(d) Suppose that the farm produces 50 packs of blueberry. What is the farm's profit?

(e) Find the profit-maximizing quantity and obtain the maximum profit.

On-the-Go, Inc., produces two models of traveling cases for laptop computers—the Programmer and the Executive. The bags have the following characteristics.

The total fixed costs per year for the company are $669,000.

Required:

a. What is the anticipated level of profits for the expected sales volumes?

b. Assuming that the product mix is the same at the break-even point, compute the break-even point.

c. If the product sales mix were to change to nine Programmer-style bags for each Executive-style bag, what would be the new break-even volume for On-the-Go?

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):

If sales decline to 900 units, what would be the net operating income?

If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?

If the variable cost per unit increases by $1, spending on advertising increases by $1,450, and unit sales increase by 190 units, what would be the net operating income?

What is the break-even point in unit sales?

CI manufactures car doors using two main process operations Stamping & Pressing and information on the business is as shown below:-

Identify the constraint(s) if any

Analyze the company’s cost and income structure

Can you identify if there is idle capacity and if so can you quantify this?

How much is the company losing from unused capacity?

Do you have any recommendations for improvement?

Question 2 a. What is GDP? Explain the three methods that the Australian Bureau of Statistics uses to calculate GDP.

b. If in 2016 the CPI is 100 and nominal wages are $500 and in 2017 the CPI is 120 and nominal wages are $550. What is the level of price inflation from 2016 to 2017? Explain whether real wages have increased from 2016 to 2017?

c. Define structural, frictional and cyclical unemployment. Which of these types of unemployment do the 'long-term unemployed' belong?

d. Explain why the growth in real per capita GDP is a more appropriate measure of economic growth that nominal GDP for the whole country. e. In an 'economic boom' what is likely to happen to inflation, unemployment and the participation rate? Explain why.

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):

6a. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the net operating income?

6b. If the variable cost per unit increases by $1, spending on advertising increases by $1,900, and unit sales increase by 280 units, what would be the net operating income?

6c. What is the break-even point in unit sales?

6d. What is the break-even point in dollar sales?

You sell short 100 shares of company A which are currently selling at $32 per share. You post the 50% margin required on the short sale. If your broker requires a 30% maintenance margin, at what stock price will you get a margin call?

You purchased 250 shares of common stock on margin for $35 per share. The initial margin is 65% and the stock pays no dividend. Your rate of return would be how much if you sell the stock at $25 per share. Ignore interest on margin.

You sold short 233 shares of common stock at $91 per share. The initial margin is 51%. You must put up how much your own equity?