"Assist me to get it right.
The HR department is trying to fill a vacant position for a job with a small talent pool. Valid applications arrive every week or so, and the applicants all seem to bring different levels of expertise. For each applicant, the HR manager gathers information by trying to verify various claims on the candidate's resume, but some doubt about "fit" always lingers when a decision to hire or not is to be made. Suppose that hiring an employee who is a bad fit for the company results in an error cost of $600, but falling to hire a good employee results In an error cost of $300 to the company. Although it is impossible to tell in advance whether an employee is a good fit, assume that the probability that an applicant is a "good fit" is 0.3, while the probability that an applicant is a "bad fit" is 1 - 0.3 = 0.7. Hiring an applicant who is a good fit, as well as not hiring an applicant who is a bad fit, results in no error cost to the company. For each decision in the following table, calculate and enter the expected error cost of that decision. Reality Good Fit Bad Fit Decision p=0.3 p 0.7 Expected Error Cost Hire Cost: 0 Cost: $600 Do Not Hire Cost: $300 Cost: 0 not hire Suppose an otherwise qualified applicant applies for a job. hire In order to minimize expected error costs, the HR department should the applicant.9. Zach took $200,000 out of the bank and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 17,000 boxes of cookies for $5 per box. Also, during the first year, the cookie business incurred costs amounting to $50,000. a. What was Zach's accounting profit for the year? (4 marks) b. What was Zach's economic profit for the year? (4 marks) C. Should Zach continue with his cookie business? (2 marks) d. A key difference between accountants and economists is their different treatment of the cost of capital. Does this difference result in an accountant's estimate of total costs being higher or lower than an economist's estimate? Explain your answer. (2 marks) 10. Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting the price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second are the 20,000 occasional TV viewerswho will pay as much as $25 a year for a subscription to PMC. a If Black Box Cable TV is unable to price discriminate, what price will it choose in order to maximize its profit, and what is the amount of the profit? (2 marks) b If Black Box Cable TV is able to price discriminate, what would be the maximum amount of profit it could generate? (2 marks) C. What is the dead-weight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy? (2 marks) d. List and explain two conditions necessary for firms to be able to successfully practice price discrimination. (2 marks)5. At its current level of production, a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $9. At the market price of $12.50 per unit, the firm's marginal-cost curve crosses the marginal- revenue curve at an output level of 1,200 units. What is the firm's current profit? What is likely to occur in this market, and why? (3 marks)3. A firm is selling its product in a perfectly competitive market, and the price for its product is $10. Total FC VC TC ATC AFC AVC MC TR MR Profit product 0 $2 2 9 2 17 24 30 36 45 55 65 78 10 93 a Complete the TC, ATC, AFC, AVC, MC, TR, MR, and profit columns. (8 marks) b At what price and output level will the above firm maximize its profit? Should this firm continue to sell in the long run? Explain your answer. (2 marks) C. Based on your answers in the table above, whyare the AVC and ATC curves U-shaped? (4 marks) 4. Give two reasons thatthe long-run industry supply curve might slope upward. Use an example to demonstrate your reasons. (3 marks)1. The data below show the relationship between number of workers hired and cost and revenue for a small, competitive farm in Alberta. Number of Wage Price Output | Marginal product Value of marginal Marginal workers of labour product of labour profit 0 $170 $5 0 1 $170 $5 70 2 $170 $5 130 3 $170 $5 180 4 $170 $5 220 $170 $5 245 a Complete the columns of marginal product of labour, value of marginal product of labour, and marginal profit. (3 marks) b. If the farm above decided to maximize its profit, how many workers would it hire? Explain your answer. (2 marks) C. Given the results fromquestion(b) above, let's assume the above farm has now a fixed cost of $10, and labour is the only variable factor. What is the farm's profit? Show your calculation. (3 marks) d. At what point do diminishing returns set in for the farmabove? Explain. (3 marks) 2. a. Describe the process by which the market for capital and the market for land reach equilibrium. As part of your description, elaborate on the role of the stock of the resource versus the flow of services from the resource. (3 marks) b When we consider all factors of production, such as labour, capital, and land, how can we find the market equilibrium? How do the changes of supply of one factor of production affect the use of other factors of production? (3 marks) C. In 2014, the dangerous Ebola virus entered Canada when a Canadian resident returned to Canada after contracting the virus while visiting Liberia. Suppose this virus had not been contained and had spread to the general population. Describe the resulting effect on labour productivity. (Assume that the virus is lethal in half of the people who are exposed to it.)
