Microeconomics
2nd Edition
ISBN: 9780073375854
Author: B. Douglas Bernheim, Michael Whinston
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 3, Problem 2CP
To determine
Calculate the marginal benefit and marginal cost of car repair and advertisement when H is 4 and A is 100.
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Students have asked these similar questions
For a certain company, the cost function for producing x items is C(x)=40x+150 and the revenue function for selling x items is R(x)=−0.5(x−90)^2+4,050. The maximum capacity of the company is 130 items.
The profit function P(x) is the revenue function R(x) (how much it takes in) minus the cost function C(x) (how much it spends). In economic models, one typically assumes that a company wants to maximize its profit, or at least make a profit!
1. Assuming that the company sells all that it produces, what is the profit function?
P(x)=
2. What is the domain of P(x)?
3. The company can choose to produce either 50 or 60 items. What is their profit for each case, and which level of production should they choose?
4. Can you explain, from our model, why the company makes less profit when producing 10 more units?
Suppose that you can purchase satellite TV service for a fixed monthly fee of $79, no matter how many hours of TV you watch. Assuming that the principle of diminishing marginal benefit applies to watching TV, the optimal (efficient) number of hours of TV to watch per month is:
Group of answer choices
Zero
The number of hours where marginal benefits are zero.
The number of hours where marginal cost is lowest.
The number of hours where marginal benefits are maximized.
Evan knows his GPA would skyrocket if he could break his horrible habit of procrastinating. An example of a commitment device Evan could use would be:
Question 46 options:
a
to allow himself one hour of leisure for every half-hour of studying he does each day.
b
to exercise before studying in order to be refreshed.
c
to pay a student to meet him each afternoon for 2 hours in the library to ensure he studies every day.
d
All of these are commitment devices.
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- You are the manager of a firm that specializes in small single-board widgets.Your goal is to determine the number of units (Z) that must be produced and sold by your firm each month in order to maximize profits. The total benefits (revenues) and costs to your firm of producing various quantities are given in the first three columns of the following table. Based on this scenario, complete the table and answer the accompanying questions: Control Variable (Z) Total Benefits B(Z) Total Cost C(Z) Net Benefits N(Z) Marginal Benefit MB(Z) Marginal Cost MC(Z) Marginal Net Benefit MNB(Z) 0 0 0 1 200 10 2 380 30 3 540 60 4 680 100 5 800 150 6 900 210 7 980 280 8 1040 360 9 1080 450 10 1100 550 A. Graph the total cost and total benefit curves.B. On another graph, plot the points for the marginal cost, marginal benefit, and marginal net benefit.C. Show how the two…arrow_forwardYou are the manager of a firm that specializes in small single-board widgets.Your goal is to determine the number of units (Z) that must be produced and sold by your firm each month in order to maximize profits. The total benefits (revenues) and costs to your firm of producing various quantities are given in the first three columns of the following table. Based on this scenario, complete the table and answer the accompanying questions: Control Variable (Z) Total Benefits B(Z) Total Cost C(Z) Net Benefits N(Z) Marginal Benefit MB(Z) Marginal Cost MC(Z) Marginal Net Benefit MNB(Z) 0 0 0 1 200 10 2 380 30 3 540 60 4 680 100 5 800 150 6 900 210 7 980 280 8 1040 360 9 1080 450 10 1100 550 a. How many units (Z) maximize net benefits?b. What is the relationship between marginal benefits and marginal costs at the level of Z you determined above?c. Graph the total…arrow_forwardYou are the manager of a firm that specializes in small single-board widgets. Your goal is to determine the number of units (Z) that must be produced and sold by your firm each month in order to maximize profits. The total benefits (revenues) and costs to your firm of producing various quantities are given in the first three columns of the following table. Based on this scenario, complete the table and answer the accompanying questions: Control Variable Z Total Benefits B(Z) Total Cost C(Z)0 0 01 200 102 380 303 540 604 680 1005 800 1506 900 2107 980 2808…arrow_forward
- Suppose an individual is looking to build a house in a plain that is prone to flooding. Because of the risk of damage due to flooding, the buyer's top dollar for building the house is only $290,000. Suppose the cost of building a house in this area is $330,000. A wealth-creating transaction is not possible since the seller's bottom line (or the cost of building the house) is (LESS THAN, EQUAL TO, GREATER THAN) the buyer's top dollar. The difference between the cost of building the house minus the buyer's top dollar is $_______. Suppose the government subsidizes flood insurance for homes in the flood plain. Because of this, the buyer has access to very cheap insurance, worth an expected $70,000. Without such a subsidy, the high likelihood of flood results in extremely high rates for flood insurance. With this subsidy, the individual (IS, IS NOT) incentivized to build a house in the flood plain..arrow_forwardThe concept of efficiency a) is the same as productivity, or the number of units of output per unit of input. b) is always understood in a purely materialistic context. c) applies only to optimization at the individual person or firm level. d) All of the above e) None of the abovearrow_forwardCost-Benefit Analysis Suppose you can take one of two summer jobs. In the first job as a flight attendant, with a salary of $5,000, you estimate the probability you will die is 1 in 40,000. Alternatively, you could drive a truck transporting hazardous materials, which pays $12,000 and for which the probability of death is 1 in 10,000. Suppose that you're indifferent between the two jobs except for the pay and the chance of death. If you choose the job as a flight attendant, what does this say about the value you place on your life?arrow_forward
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