Problem 2:Cost-benefit Analysis and present value calculations. A project costs10 this year (year 0), has a benefit of 35 next year (year 1), and has a cost of 5 next year(year 1).(a)Assuming that the interest rate is r= 1, what is the present value (sum of the dis-counted benefits minus costs) of the project?(b)For what value of interest rater, the present value of the project will be exactly equal to zero?Let r be that value.Explain in two sentences if you expect the present value to be positive or negative if the interest rate is less than r.

Problem 3: Monopolies. The total cost of producing Q units of output to a monopolist is TC(Q) = 3Q2.The market demand is given by Q= 5P/2.1

(a)What are the total revenue and marginal revenue functions?(b)What price should the monopolist set to maximize its profit?Illustrate your answer on a graph.