Question 1:

a company produces T-shirts and the total benefit and total cost functions are given by the following equations: B(Q)=100+60Q C(Q)=30+Q2, answer below question?

a. Write out the equation for net benefits.

b. What is the net benefit when the company produces and sells 20 T-shirts?

c. What is the net benefit when the company produces and sells 50 T-shirts?

d. What is the marginal net benefit when the company produces 20 T-shirts?

e. How many T-shirts should the company produce to maximize its profit?

f.What is the maximum profit can this company make?

g. What is the marginal cost of production when the company produces the profit maximizing quantity?

h. What is the marginal benefit when the company sells the profit maximizing quantity?

Question 2

Drug addiction is a major problem in the United States. Your company, similar to many others, has been investing in research and development to find a cure to the problem. The fact that research and development expenses have increased significantly over the years made many companies in the industry shy away from funding R&D activities. Your company already invested $200 Million to date working on a specific cure and you are now one step away to come up with a marketable product. You are, however, now at the crossroads to make a decision to stop your program all together or to make an additional investment of $60 M to finalize your product. You know that once you make the final investment of $60M today, it will take 4 more years to get approval from FDA. In the meantime you will not be able to sell your product. Your opportunity cost of funds is 5%.You also know that the patent you will receive from FDA will be for 5 years. After 5 years, your patent will expire and your cures will probably be imitated by other companies who will start selling generic products in the market. Based on the information, expected year-end profits from selling your cure are presented in the table below.

Based on the expected year-end profits, please calculate the present value of your total profit. Should you stop your R&D activities or continue? Please explain your rationale.

Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10$0$0$0$0$36M$40.2M$51.6M$62.1M$67.35 M$0

Question3-

demand and supply for a given product, X, are given byQxd=24-Px qXS=(1/2)pX-3, answer below question?

a. Determine the equilibrium price in the market.

b. Determine the equilibrium quantity supplied and demanded in the market.

c. Suppose a $3 excise tax is imposed on the good. Determine the new equilibrium price and quantity.

d. How much tax revenue does the government earn with $3 tax?

e. What is the decrease in the market quantity?

f. When you compare the price before and after tax, what can you say about the tax burden? Who is paying $3 tax? The consumers or sellers?

g. What is the consumer and producer surplus before and after tax?

h. What is the total surplus after tax?

i. Does the tax increase social welfare or not?

j. Why do you think governments impose tax?

Question4

Where Pyand Pz stand for price of 2 other related goods, M stands for income of individuals consuming this product in equation Qxd=8000-Px-2Py+9Pz+(1/12)M

a. Indicate whether goods Y and Z are substitutes or complements for good X and why?

b.Is X an inferior or normal good.

c.If Py=$3,000,pZ=$200, and M= $60,000, how many units of good x will be purchased in the market when Px=$ $2,500?