Questions:

In a competitive market, the market-determined price is $25. A firm in this market is producing 10,000 units of output, and, at this output level, the firm's average total cost reaches its minimum value of $25. What should the firm do?

Group of answer choices

Increase output because long-run marginal cost is above the average variable cost

Reduce output because average total cost is above the price

Reduce output because average total cost is above the average variable cost

Maintain current output because price is equal to long-run marginal cost

Maintain current output because price is equal to average variable cost

Increase output because the price is above average variable cost

A company is considering investing in the following project. The company has to make an initial investment of three payments, each of f105,000. The first is due at the start of the project, the second six months later, and the third payment is due one year after the start of the project. After 15 years it is assumed that a major refurbishment of the infrastructure will be required, costing $200,000. The project is expected to provide no income in the first year, an income received continuously of E20,000 in the second year, $23,000 in the third year, $26,000 in the fourth year and E29,000 in the fifth year. Thereafter the income is expected to increase by 3% per annum (compound) at the start of each year. The income is expected to cease at the end of the 30th year from the start of the project. The cash flow within each year is assumed to be received at a constant rate. (i) Calculate the net present value of the project at a rate of interest of 8% pa effective. [8] (ii) Show that the discounted payback period does not fall within the first 15 years, assuming an effective rate of interest of 8% pa. [5] (iii) Calculate the discounted payback period for the project, assuming an effective rate of interest of 8% pa. [5] [Total 18]An analysis using the simple linear regression model based on 19 data points gave: Sir = 12.2 S =10.6 Sxy =8.1 (i) (a) Calculate B. (b) Test whether S is significantly different from zero. (4] (ii) (a) Calculate r. (b) Test whether p is significantly different from zero. (4] (iii) Comment on the results to your tests from part (i) and (ii). (2] [Total 10]