Reference no: EM132938285

Apply the tactics learned in class to respond to the questions below
Questions

1. A consumer's consumption-utility function for a two-period horizon is U = . ; his income stream is y1 = 1000, y2 = 648; and the market rate of interest is 0.08. Determine values for c1 and c2 that maximize his utility. Is he a borrower or lender?

2. . Consider a bond market in which only consumers borrow and lend. Assume that all 150 consumers have the same two-period consumption-utility function: U = c1c2. Let each of 100 consumers have the expected-income stream y1 = 10,000, y2 = 8400, and let each of the remaining 50 consumers have the expected-income stream y1 = 8000, y2 = 14,000. At what rate of interest will the bond market be in equilibrium?

3. . Consider an entrepreneur engaged in a point-input-point-output wine-aging process. His initial cost is 20, the sales value of the wine is R(T) = 100√ , and the rate of interest is 0.05. How long is his optimal investment period?

4. . An entrepreneur is engaged in tree growing. He purchases a seedling for 4 dollars, incurs a cultivation cost flow at a rate of G(t) = 0.4t dollars per year during the life of a tree, and sells the tree at t = T for R(T) = 4 + 8T - T 2 dollars. The market rate of interest is 0.20. Determine an optimal length for his cultivation period, T. Apply the appropriate second-order condition to verify that your solution is a maximum.

5. An entrepreneur plans for a one-machine horizon. He purchases the machine for 500 dollars. Its scrap value at time T is S(T) = 500 - 40T. The rate of interest is 0.05. The machine yields a quasi-rent flow at the rate Zt = 85 - 4t dollars per year. When should the entrepreneur retire this machine?

6. How might price elasticity of demand be important to a firm attempting to increase its market share?

7. How might this pricing approach be used by a public transport company?

8. Evaluate the usefulness of he Boston Matrix to a manufacture of shoes

9. A multinational company is about to launch a new camera in your country. Discuss a marketing strategy the company might use to achieve a successful launch.

10. Evaluate the usefulness of the product life cycle to a company when deciding on the future product mix of its business.