Managerial Economics

1. WHAT IS THE MAXIMUM AMOUNT YOU WOULD PAY FOR AN ASSET THAT GENERATES AN INCOME OF $150,000 AT THE END OF EACH YEAR IF THE OPPORTUNITY COST OF USING THE FUND IS 9 PERCENT? ( 5 marks) 2. SUPPOSE THAT THE TOTAL BENEFIT AND TOTAL COST FROM AN ACTIVITY ARE, RESPECTIVELY, GIVEN BY THE FOLLOWING EQUATIONS: (15 marks) B(Q)=150+28Q5Q2C(Q)=100+8Q NOTE: MB(Q)=2810Q MC(Q)=8 A. WRITE OUT THE EQUATION FOR THE NET BENEFIT. B. WHAT ARE THE NET BENEFIT WHEN Q=1 ? AND WHEN Q=5 ? C. WRITE OUT THE MARGINAL NET BENEFITS. D. WHAT ARE THE MARGINAL NET BENEFIT WHEN Q= 1 AND WHEN Q=5 ? E. WHAT LEVEL Q MAXIMIZES NET BENEFIT