1.Profit Maximization

BUBABU is going to launch a new business campaign. BUBABU has a demand function and a cost equation as follows:

P = 66,000 - 50Q

TC = 90,000 + 6,000Q + 10Q²

1.1 Calculate quantity (Q), price (P), total revenue (TR) and total profit () for the profit maximizing level of output.

1.2 Calculate quantity (Q), price (P), total revenue (TR) and total profit () for the revenue maximizing level of output.

1.3 If the total cost function of BUBABU changes to TC = 90,000 + 6,000Q + 10Q² (i.e. in a perfect competition market), find quantity (Q), price (P), total revenue (TR) and total profit () for the cost minimizing level of output.

2. Risk and Uncertainty

There are three decisions as follows:

Decision	Probability	Profit
A	1	$4,500
B	x	$6,000
1-x	$1,500
C	y	$20,000
y	$15,000
1-2y	$2,500

2.1 Find x that makes a certainty equivalent between Decisions A and B

2.2 Find y that makes a certainty equivalent between Decisions A and C

2.3 From 4.1, what should a firm make a decision if x = 0.5

2.4 From 4.2, what should a firm make a decision if y = 0.05