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Hello!! I need help with these 2 questions plz.. Thanks in advance.. Question 1. C and S Metal Company produces pots and pans. C and
Hello!! I need help with these 2 questions plz.. Thanks in advance..
Question 1. C and S Metal Company produces pots and pans. C and S can pursue either of two distribution plans for the coming year. The firm can either produce pots and pans for sale under a discount store label or manufacture a higher quality line for specialty stores and expensive mail order catalogs. High initial setup costs along with C and S's limited capacity make it impossible for the firm to produce both lines. Profits under each plan depend upon the state of the economy. One of three conditions will prevail: growth (probability 0.3), normal (probability = 0.5), recession (probability 0.2) The outcome under each plan for each state of the economy is given below. Figures in the table are profits measured in dollars. The probabilities for each economic condition represent crude estimates. Discount Line Specialty Line Economic Condition Growth Normal Recessiorn 250,000 220,000 140,000 400,000 230,000 20,000 a. b. c. Calculate the expected value for each alternative. Which alternative is more risky? Taking into account the importance of risk, which alternative should an investor choose? Question 2. The elected officials in XYZ university town are concerned about the "exploitative" rents being charged to college students. The town council is contemplating the imposition of a $350 per month rent ceiling on apartments in the city. An economist at the university estimates the demand and supply curves as: QD-5600-8P and QS-500 + 4P, where P = monthly rent, and Q = number of apartments available for rent. For purposes of this analysis. apartments can be treated as identical. a. Calculate the equilibrium price and quantity that would prevail without the price ceiling. Calculate producer and consumer surplus at this equilibrium. b. What quantity will eventually be available if the rent ceiling is imposed? Calculate any gains or losses in consumer and/or producer surplusStep by Step Solution
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