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You inherit a phosphate mining company and are now in charge of production decisions. You only have two years to extract all of the phosphate because in three years from now, an environmental regulation will go into effect banning mining in that area. There are 300 tons of phosphate to mine. The marginal benefit (marginal revenue) from selling phosphate (which is used in fertilizers) is: MB = 200 - Q and is the same for both periods. The Marginal Extraction Cost is zero and you face a discount rate of 10%. a. Consider year one. When your marginal benefit = 0, how much are your sales of phosphate (Q)? if you do not sell any phosphate, how much is your marginal benefit? if you sell all 300 tons of phosphate, how much is your marginal benefit? [NOTE: there is no “economics” here – this is just plugging in numbers to help you make a graph in the next question] b. The answers to part (a), combined with the fact that MEC = 0, should enable you to graph out the Net Marginal Benefit curve for year one (NMB1). c. Knowing that the NMB is the same for year two (NMB2), graph NMB2 on the same graph as NMB1. d. Discount your curve for NMB2, to get PV(NMB2), and plot that line on the graph as well. e. What is the optimal amount of phosphate to sell in the first year and the second year? Recall that the total amount of phosphate available is 300 tons. Show all of your work and label these amounts on your graph. f. If the discount rate rises, what do you think will happen to your answers in part (c)? (you do not need to use actual numbers, but talk about what happens when discount rates rise)
Patrick chooses to use his time ‘free-time’: (a) working out or (b) reading. Patrick currently has 20 hours a week to allocate to these two activities. It takes Patrick 1.5 hour to work out and .5 hours to read. Patrick enjoys both activities, but he..
Which one of the following statements about total quality management (TQM) is TRUE?
Currently oil prices are below their normal levels, but once the U.S. economy and the other economies around the world reach their steady state growth rates, oil prices will rise sharply. What happens to the inflation rate if the Fed tries to accommo..
A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 120 - 0.25P, and the marginal cost of production is $160. Determine the optimal number of units to put i..
Suppose you want to test whether the 1993 FMLA actually affected the wages of female workers. Assume you have data on the wages, gender, firm size, and other characteristics (age, education, race, ethnicity, etc.) of workers for the years 1990 to 199..
In order for price discrimination to exist
A coffee retailer (Bob’s) developed the following daily demand curve for coffee for Your Town, NY. Where P is the price of Bob’s coffee, Pc is the price of Starbuck’s, and M is income in YourTown. Currently Bob’s and Starbuck’s Coffee are priced at $..
Discuss the characteristics of the most effective company development strategies
If tax rates stay the same, what will happen to total tax revenue?
Which of the following is an interest rate target specified in the FOMC directive?
Suppose that the U.S. Department of Agriculture (USDA) administers the price floor for cheese, set at $0.17 per pound of cheese. The graph also shows that the minimum price at which a few of the producers are willing to sell is $0.06 per pound. In t..
To increase tax revenue, the US government in 1932 imposed a two-cent tax on checks written on deposits in bank accounts. Use the model of the money supply under fractional-reserve banking to discuss how this tac affected the money supply.
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