Group Project No. 1 Instruction: Every group must submit only one document. All members will, then, receive the same grade after your work is fully assessed. So, make sure that an efficient and relatively fair task distribution is in place. As for the delivery of your work, please make use of this MS Word file in order to organize your answers to the following questions. Then, save your work as a PDF file. Submit the PDF file on Canvas before the pre-determined due date. Let me know via email should you have any questions or concerns. Begin by writing the name of the group members in the space below: Then, answer the following questions, one by one: 1. Consider this supply function (in its inverse form and in levels): P(Q) = 2.5 + 0.33Q a. Using Excel, plot this function where O varies between 1, 2, 3, 4, and 5. (5 points) b. Among the candidate functions below, find the function that represent the effects from ad valorem subsidy. Then, plot that function along with the function that you plotted in part a. (10 points) The candidate functions are: i. P(Q) = 2.5 + 0.330 + 0.1 ii. P(Q) = 2.5 + 0.330 - 0.1 iii. P(Q) = 2.5 + 0.330 + 0.10 iv. P(Q) = 2.5 + 0.33Q - 0.10 c. In a short paragraph (word limit: 100 words), describe the differences from the supply effect of ad valorem subsidy vs. ad valorem tax. (10 points) 2. Consider the total cost and total revenue functions below for a production line: Total cost function: TC(Q) = 0.25 + 0.1Q2, where Q =1, 2, 3, ..., 15 Total revenue function: TR (Q) = 1.70, where Q =1, 2, 3, ..., 15. a. Fill out the blanks in the table below. (20 points: 5 points per column) TC MC TR MR W N - 67 8 10 11 12 13 14 15 Note: O is output quantity units (per hour), TC is total cost (in dollars), MC is marginal cost (in dollars), TR is total revenue (in dollars), and MR is marginal revenue (in dollars). b. Plot the marginal cost and marginal revenues in a coordinate system. Put the variations in output quantity units on the horizontal axis. Put the variations in marginal revenue and marginal cost, both of which are measured in dollars, on the vertical axis. Put your plot below. (10 points) C. Using marginal analysis, find the profit-maximizing output ((*). Compute the amount of maximum profit (measured in dollars per hour). (7.5 points: 2.5 points for the profit-maximizing output and 5 points for maximum profit amount) As noted previously, the above total cost and revenue functions are for one production line. Consider a production plant that has 100 production lines, working for 21 hours per day, 6 days per week, and 52 weeks per year. Compute the maximum annual profit for this production plant. (7.5 points) 3. Southern Cotton International is a textile company. It offers two main products. Its marketing department has recently estimated the demand function, facing SCI: Demand for product 1: Inq," = do + Bilnp, + alps + aclnpete Lng,"is the quantity demanded for product I (in natural log), Lap, is the price of product 1 (in natural log), Laps is the price of product I's substitute (in natural log), Lupe is the price of product I's complement (in natural log), and & is the error term. Parameter , is estimated to be equal to -0.45 (with standard error being equal to 0.15). Demand for product 2: Lnq," = @, + Pylnp2 + asLaps + aclnpete Lnq2" is the quantity demanded for product 2 (in natural log), Lap, is the price of product 2 (in natural log), Laps is the price of product 2's substitute (in natural log), Lnpc is the price of product 2's complement (in natural log), and & is the error term. Parameter 82 is estimated to be equal to -0.65 (with standard error being equal to 0.05). a. How much does the demand for product 1 increase if SCI reduces its price by 5%? Describe your answer in percentages. (7.5 points) b. How much does the demand for product 2 increase if SCI reduces its price by 5%? Describe your answer in percentages. (7.5 points)c. Which one of the above products has a more sensitive demand? Explain your answer in a short paragraph (word limit: 75 words). (7.5 points) d. Consider the demand for product 1 (or product 2). Which one of the parameters below is expected to be less than zero: as or a? Explain your answer in a short paragraph (word limit: 75 words). (7.5 points)