A company that produces healthcare services (patient visits) operates with the following production function where q denotes the weekly output level in terms of the number of patients, L represents the hours of human intelligence (doctors and nurses) employed per week, and K denotes the hours of artificial intelligence utilized per week: q=L0.5 K0.25
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- Calculus is a powerful tool used in economics. One of the initial applications areas is the study of a firm, a topic in microeconomics. An important function is the cost function function C(x), the cost of producing x items (of whatever they are selling). This question deals with just the cost function C(x). Problem Set question: The cost, in dollars, of producing x units of a certain item is given by C(x)=5x−4x−1−−−−√. Find the production level that minimizes the average cost per unit. The number of units that minimizes the average cost is .Suppose that the inverse demand for aloe juice in Greece is given by P = 100 – 2Q, where P is the price per bottle (1000ml) of aloe juice and Q is the total quantity, i.e., number of bottles, supplied in the market. There are two aloe juice manufacturers in Greece, Aloe Health and Aloe Wealth, operating under similar cost conditions. Each manufacturer's cost function is C(q) = 4qi, i =1,2, where q¡ is the manufacturer's individual quantity produced and Q = qı + q2. (a) Based on demand conditions every year, they decide, independently of each other, the quantity of aloe juice that will be supplied, letting the market determine the price per bottle. Find the equilibrium price and each firm's profit in this market. %3D (b) Consider that the above two manufacturers form a cartel, agreeing to fix their total quantity in such a way that the market maintains a collusive price. For simplicity, the eventual cartel directory will determine the target total-quantity and price pair, and each firm…Exercise 2.7 (P&R, chap. 8, p. 326: Exercise12) A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function C(q) = 50+ 0.5q +0.08q² and a marginal cost MC = 0.5 + 0.16q. a) If the going rate for developing a roll of film is €8.50, is the industry in long-run equilibrium? If not, find the price associated with long-run equilibrium. b) Suppose now that a new technology is developed which will reduce the cost of film developing by 25 percent. Assuming that the industry is in long-run equilibrium, how much would any one store be willing to pay to purchase this new technology?
- Exercise 4.6 An econometrician hired to analyse a local golf course has determined that there are two types of golfers, the regular and the occasional. The annual demand for games from regular players is given by QH = 24 – 0.3P, where P is the price of a round of golf. On the other hand, the annual demand for occasional items is given by QO = 10 – 0.1P. The marginal cost and the average total cost per item are equal to €20. a) If you could distinguish between regular and casual players, what price would be set for each type? How many games would each type of player play? How much profit could the golf course generate? Represent graphically. b) As an alternative to the discrimination of third degree prices, those in charge consider a double tranche rate according to which the members can play as many games as they wish at a price of € 20 per game. How much profit will the golf course generate if it charges all players the same annual fee for becoming a member of the club? What if you…The daily cost to manufacture generic trinkets for gullible tourists is given by the cost function C(x) = -0.001x2 + 0.7x + 590 dollars, where x is the number of trinkets. (a) Find C'(x). C'(x) = As x increases, the marginal cost does which of the following? increases decreases increases then decreases decreases then increases (b) Find C(x). C(x) = As x increases, the average cost does which of the following? increases decreases increases then decreases decreases then increases (c) Find the following values. C'(100) = C(100) The marginal cost is less than the average cost when x = 100. Submit Answer O ONorthside Social (NS) sells cups of coffee and amazing breakfast sandwiches. The current price of a cup of coffee is $3.00 and the current price of an amazing breakfast sandwich is $8.00. At those prices, NS sells 1000 cups of coffee and 200 breakfast sandwiches daily. NS faces a constant marginal cost for each cup of coffee of 50 cents and the constant marginal cost of breakfast sandwiches is $2. NS increases the price of coffee 5%, to $3.15. After the price increase, NS sells 900 cups of coffee, a decrease of 10% in cups of coffee. Assuming the above, what if NS also changes the price of breakfast sandwiches from $8 to $10 (a 25% increase in price) and that the number of breakfast sandwiches sold decreases from 200 to 180 (a 10% decrease in quantity). Which of the following is true? A) Coffee profits and breakfast sandwich profits increase.B) Coffee profits decrease by more than breakfast sandwich profits decrease.C) Coffee profits decrease by more than breakfast sandwich profits…
- 2.4 Water is produced and sold by the government. Demand for water is represented by the linear function Q=50-2P. The total cost function for water production is also a linear function: TC(Q)= 100+ 100. You will also need to work out both the average cost of production, denoted by AC(Q), equal to the total cost of producing a quantity of output divided by that quantity of output, TC(Q)/Q, and the marginal cost of production, denoted by MC(Q), which is the additional cost incurred to produce one more unit. a. What fee should the government charge per unit of water in order to reach the efficient allocation? b. How much should it charge if it wishes to maximize profit from the sale of water? C. What is the value of the efficiency loss that results from charging the price in part b rather than the price determined in part a?The cost of producing x teddy bears per day at the Cuddly Companion Co. is calculated by their marketing staff to be given by the formula C(x) = 100 + 37x - 0.07x2. (a) Find the marginal cost function C'(x). C'(x) = (b) How fast is the cost going up at a production level of 100 teddy bears? When they produce 100 teddy bears, the production costs are increasing at a rate of x dollars per teddy bear In other words, the cost to produce the 101st teddy bear is approximately dollars (c) Find the average cost function C, and evaluate C(100). C(x) = C(100) = So when they produce 100 teddy bears, the average cost per teddy bear is x dollars. (d) Fill in the blanks: Since the marginal cost is less than the average cost per unit, increasing production from 100 teddy bears will cause the average cost per unit to decrease.11.2 The cost, in thousands of dollars, of airing x television commercials during a sports event is given by C(x) = 20 + 3,000x + 0.01x2. (a) Find the marginal cost function C'(x). HINT [See Example 1.] C'(x) = Use it to estimate how fast the cost is increasing when x = 4. thousand dollars per television commercialCompare this with the exact cost of airing the fifth commercial. The cost is going up at the rate of $ per television commercial. The exact cost of airing the fifth commercial is $ . Thus, there is a difference of $ . (b) Find the average cost function C, and evaluate C(4). HINT [See Example 2.] C(x) = C(4) = thousand dollars per television commercial What does the answer tell you? The average cost of airing the first four commercials is $ per commercial.
- A lot of companies use the marginal cost function for their business models to determine the production level to minimize total costs. As we all know, if C (x) represents the total cost of producing x units of a product, then the average cost per unit at this production Let assume C (x) is differentiable on all x > 0 . This implies that the C(x) level is average cost function is also differentiable for all x > 0 since C(x) can be written as C (x) · - , and both C (x) and are differentiable for all x > 0. Suppose you go to an interview and the chairman of the interview committee gives you the following questions: In our company , we use marginal cost to determine the production level to minimize the costs. However, there is another useful model in business, the average cost function, that we also track. 1. Is it true or not that the marginal cost C '(x) is equal to the average cost at the critical points of the average cost function? Please elaborate and explain to us. 2. This year, the…The weekly marginal cost of producing x pairs of tennis shoes is given by the following function, where C(x) is cost in dollars. C′(x)=15+500x+1 If the fixed costs are $4,000 per week, find the cost function. What is the average cost per pair of shoes if 1,000 pairs of shoes are produced each week?In a fishery the long-run harvest function (harvest volume) isH(E) = aE - bE2, with a, b representing positive constants and E is fishing effort.Total cost is TC(E) = CE, with e being the unit cost of effort.Total revenue is TR(E) = pH(E), with p being the constant price of fish. Explain why higher levels of effort (E) beyond a certain point are associated withreductions in long-run total revenue (TR).