Final Exam Economics 3551 – Jack’s faces the following demand function

| April 14, 2018

Economics 3551 Lynn
Paringer
Managerial Economics
Practice Final Exam
Questions 1 – 6
Jack’s faces the following demand function
for its Jack in the Boxes: Q = 13000 – 8P. Jack produces the Jack in the Boxes in two
facilities. The cost functions in each
facility are:
TC1 = 110,000 + 40Q1 + .09Q12
TC2 = 200,000 + 80Q2 + .05Q22

Calculate the Q at which average cost is a minimum in facility
1. What is minimum average cost?
Graph the average cost, marginal cost and average variable cost
functions for facility 1.
Calculate the profit maximizing amount of Q to make and the
profit maximizing price.
Calculate the amount of Q that will be made in each
facility.
Calculate the overall profits of the firm.
Calculate the marginal revenue at the profit maximizing amount
of Q.

Questions 7 – 11
Marion the monopolist faces the following
demand function: Q = 22,000 – 8P. She
faces the following cost function: TC = 5,000,000 + 140Q.

Calculate the price and quantity at which profits are a
maximum.
What are the maximum profits?
Graph the demand, marginal revenue, marginal cost and average
cost functions.
Shade in the area that represents the profits of the firm.
Now assume that regulators have decided to regulate Marion so that price
= average cost. What price and
quantity does this correspond to?

Questions 12 – 14
The demand for boobles can be written as: Q
= 11,000 – 8P.

Calculate the price, quantity, total revenue and marginal
revenue when the elasticity of demand = -2.2.
Calculate the price, quantity, total revenue and elasticity of
demand when MR = $60.
Calculate the price and quantity at which total revenue is a
maximum. What is maximum revenue?

Questions 15 – 19
Felicia has the following production
function: Q = 6K1/2L1/2.
She faces the following demand function: Q = 12,000 – 8P. The price per unit of K is $500 and the price
per unit of L is $2,500.

Calculate the amount of K and L that Felicia will use.
Calculate the profit maximizing amount of output and the profit
maximizing price.
Calculate the maximum profits of the firm.
Calculate the marginal revenue at the profit maximizing amount
of Q.
Calculate the marginal product of labor at the K and L in
question 15.

Questions 20 – 21
Reefer sells refrigerators to two classes
of consumers. The first class has the
less elastic demand. The second class is
known as the “rebaters”. They have a
higher elasticity of demand. Assume the
elasticity of demand of the first group is -1.9 and the elasticity of demand of
the second group is -2.2 and the marginal cost of a refrigerator is $500.

What price should Reefer set for the refrigerator?
What should the rebate be if Reefer wants to sell to both
classes of consumers?

Questions 22 –
25
Samson’s faces
the following production function: Q = 400L + 16L2 – .5L3.

Calculate the L at which Q is a maximum. What is the maximum Q?
Calculate the L at which the marginal product of L is a
maximum. What is the maximum
marginal product of L?
Calculate the L at which the average product of L is a
maximum. What is the maximum
average product of L?
Assume each unit of Q sells for $4 and each unit of L costs
$1,000. How much L should the firm
hire if it is to maximize profits?
What are its maximum profits?

Questions 26 – 29
Sam can sell all of the output he wants at
a price of $1000. He has the following
cost function:
TC
= 200,000 + 80Q + .08Q2

Calculate the profit maximizing quantity.
Calculate the maximum profits of the firm.
Graph the demand, marginal revenue, marginal cost and average
cost functions.
Shade in the area that represents the profits of the firm.

Questions 30 – 34
When P = 710, the demand for flugles is
4950. When P = 1150, the demand for
flugles = 2750.

Using these two points and assuming the demand for flugles is a
straight line, calculate and graph the demand function and the marginal
revenue function for flugles.
Now assume that the cost
function for flugles can be written as:

TC = 140,000 + 90Q + .07Q2
Graph the marginal cost and average cost
functions on the same graph that you just graphed demand and marginal revenue.

Calculate the profit
maximizing price and quantity of flugles and mark the points a (profit
maximizing quantity) and b (profit maximizing price) on your graph.
What is the average cost
at the profit maximizing quantity?
Mark this point on your graph and label it c. Shade in the area
that represents the profit of the firm.
Graph the total revenue and total cost functions and mark the
profit maximizing level of output on the graph.

Questions 35 – 38
Below is a graph of the marginal cost,
average cost, demand and marginal revenue functions of the Flooble firm. Fixed
costs are $180,000.

a=
b=
c=
d=

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