Reference no: EM132479145

1. The following table depicts the prices and total costs a local used-book store faces. The bookstore competes with a number of similar stores, but it capitalizes on its location and the world-of-mouth reputation of the coffee it serves to its customers

(1) (2) (3) (4) (5) (6) (7) (8)

Output (Books) Price per Book $ Total Cost $ Average Total Cost $ Total revenue $ Total Profit $ Marginal Cost $ Marginal Revenue $

0 20.00 7.00

1 19.00 21.50

2 18.00 34.40

3 17.00 45.40

4 16.00 55.00

5 15.00 63.30

6 14.00 72.30

7 13.00 84.90

8 12.00 101.20

9 11.00 121.30

10 10.00 146.40

a- Complete the missing cells

b- On marginal analysis, what is the approximate profit-maximizing level of output for this business? Explain.

c-Draw a diagram depicting the demand curve (Price), average total cost (ATC), marginal cost (MC), and marginal revenue (MR) curves for this business and illustrate the determination of its profit-maximizing output rate. Use Excel

2- The American Manufacturing Company produces only one product. The firm purchases a key input at a price of $4 per unit of production. The firm then pays a wage rate of $6 per unit for the time that labor is exerted. In addition, $2 of indirect inputs is paid for each final unit of output produced. The firm sells every units of the product for $20. What is the contribution of each unit of output to GDP in the current year?

3- Each year, Peter typically does all his own landscaping and yard work. He spends $160 per year on mulch for his flower beds, $240 per year on flowers and plants, $80 on fertilizer for his lawn, and $174 on gasoline and lawn mower maintenance. The lawn and garden store where he obtains his mulch and fertilizer charges other customers $390 for the service of spreading that much mulch in flower beds and $160 for the service of distributing fertilizer over a yard the size of Peter's. Paying a professional yard care service to mow his lawn would require an expenditure of $1,800 per year, but in that case, Peter would not have to buy gasoline or maintain his own lawn mower.

a-In a normal year, how much Peter's landscaping and yard work contribute to GDP?

b- If Peter has developed allergy problems this year and will have to reduce the amount of his yard work. He can wear a mask while running his lawn mower, so he will keep mowing his yard, but he will pay the lawn and garden center to spread mulch and distribute fertilizer. How much will all the work on Peter's yard contribute to GDP this year?

4- A firm that sells e-books relating to of these topics (home plumbing, gardening, and the like) at the same price. At present, the company can earn a maximum annual profit of $25,000 when it sells 10,000 copies within a year's time. The firm incurs a 50-cent expense each time a consumer downloads a copy, but the company must spend $100,000 per year developing new editions of the e-books.

a- At the profit-maximizing quantity, what is the total cost of producing the e-books?

b- At the profit-maximizing quantity, what is the average total cost of producing e-books?

c- At the profit-maximizing quantity, what is total revenue?

d- what is the profit-maximizing price of e-books relating of the topics above?