P2.

Profit Maximization: Equations. 21st Century Insurance offers mail-order automobile insurance to preferred-risk drivers in the Los Angeles area. The company is the low-cost provider of insurance in this market but doesn't believe its annual premium of $1,500 can be raised for competitive reasons. Rates are expected to remain stable during coming periods; hence. . Total and marginal cost relations for the company are as follows:

A. SOLUCIN Haciendo

Calculate the profit-maximizing activity level.

y despejando es

encontramos nivel de actividad que produce el beneficio mximo, esto

En general

B.

Calculate the company's optimal profit, and optimal profit as a percentage of sales revenue (profit margin).

SOLUCIN La funcin de ingresos totales est dada por: ( )( ) Con

El beneficio total est dado por:

Sustituyendo

en la ltima expresin: ( ) ( )

Y como

Entonces ( )

Por otro lado:

Es decir, el 6%.

P2.9

Average Cost Minimization. Giant Screen TV, Inc., is a Miami-based importer and distributor of 60-inch screen HDTVs for residential and commercial customers. Revenue and cost relations are as follows:

A.

Calculate output, marginal cost, average cost, price, and profit at the average cost-minimizing activity level.

SOLUCIN Para encontrar el nivel promedio del costo mnimo de la produccin, se requiere hallar haciendo

Donde

Esto es

Se observa que Q no puede ser cero, esto es

As

Extrayendo raz cuadrada POSITIVA, en ambos lados

Por lo que ( )

Se verifica que

Para hallar

Calculemos primero

Luego ( ) ( )

Finalmente

)(

B. Haciendo

Calculate these values at the profit-maximizing activity level.

y despejando es

encontramos nivel de actividad que produce el beneficio mximo, esto

, As

en general

Finalmente

Sustituyendo ( ) ( )

C.

Compare and discuss your answers to parts A and B.

El costo promedio se minimiza cuando MC = AC = $1,240 y dado que P = $1,470 dlares, entonces hay una ganancia de $230 por unidad de producto cuando Q = 55,000. El beneficio total en A es millones. En B el beneficio se maximiza cuando Q = 50000 con MR = MC = $ 1,200 en ese nivel de actividad. Donde . Con P = $1,500 dlares y AC = 1242 dlares hay un beneficio de $258 por unidad de producto cuando Q = 50.000. Y as hay un beneficio total millones. Finalmente se observa que el beneficio total es mayor en el nivel de actividad de siendo la diferencia de $2, as la disminucin en el costo promedio es ms que compensado por la diferencia de , que es el precio de ampliar las ventas de Q = 50,000 a Q = 55.000 unidades.

P3.5

Demand Function. The Creative Publishing Company (CPC) is a coupon book publisher with markets in several southeastern states. CPC coupon books are sold directly to the public, sold through religious and other charitable organizations, or given away as promotional items. Operating experience during the past year suggests the following demand function for CPCs coupon books:

where Q is quantity, P is price ($), Pop is population, is disposable income per household ($), and A is advertising expenditures ($). A. Determine the demand faced by CPC in a typical market in which P = $10, Pop = 1,000,000 persons, I = $60,000, and A = $10,000.

SOLUCIN La demanda que enfrenta CPC en un Mercado tpico con los valores dados est dada por ( ) ( ) ( ) ( )

B.

Calculate the level of demand if CPC increases annual advertising expenditures from $10,000 to $15,000.

SOLUCIN Si la publicidad se eleva de $ 10.000 a $ 15.000, la demanda CPC se eleva a: ( ) ( ) ( ) ( )

C. SOLUCIN

Calculate the demand curves faced by CPC in parts A and B.

Para el apartado A, tenemos que la funcin Q en trminos del precio P est dada por ( ) ( ) ( )

Si ponemos esta ltima funcin en trminos de Q, entonces

La curva de demanda correspondiente es:

Para el apartado B, tenemos que la funcin Q en trminos del precio P est dada por ( ) ( ) ( )

Si ponemos esta ltima funcin en trminos de Q, entonces

La curva de demanda correspondiente es:

P3.6

Demand Curves. The Eastern Shuttle, Inc., is a regional airline providing shuttle service between New York and Washington, D.C. An analysis of the monthly demand for service has revealed the following demand relation: Q = 26,000 - 500P - 250POG + 200IB - 5,000S, where Q is quantity measured by the number of passengers per month, P is price ($), POG is a regional price index for other consumer goods (1967 = 1.00), IB is an index of business activity, and S, a binary or dummy variable, equals 1 in summer months and 0 otherwise. A. Determine the demand curve facing the airline during the winter month of January if POG = 4 and IB = 250.

SOLUCIN: La curva de demanda que enfrenta The Eastern est dada por: ( ) ( ) ( )

Despejando P en trminos de Q

La grfica correspondiente es:

B.

Determine the demand curve facing the airline, quantity demanded, and total revenues during the summer month of July if P = $100 and all other price-related and business activity variables are as specified previously.

SOLUCIN: Durante Julio (verano) S=1, as que: ( ) ( ) ( )

Despejando P en trminos de Q

La grfica correspondiente es

La cantidad demandada durante Julio est dada por: ( pasajeros Por ltimo, los ingresos totales son: ( )( ) ( )( ) ) ( ) ( ) ( )

P3.8

Supply Curve Determination. Olympia Natural Resources, Inc., and Yakima Lumber, Ltd., supply cut logs (raw lumber) to lumber and paper mills located in the Cascades Mountain region in the state of Washington. Each company has a different marginal cost of production depending on its own cost of landowner access, labor and other cutting costs, the distance cut logs must be shipped, and so on. The marginal cost of producing one unit of output, measured as one thousand board feet of lumber (where one board foot is one square foot of lumber, one inch thick), is: MCO = $350 + $0.00005QO MCY = $150 + $0.0002QY (Olympia). (Yakima).

The wholesale market for cut logs is vigorously price competitive, and neither firm is able to charge a premium for its products. Thus, P = MR in this market. A. Determine the supply curve for each firm. Express price as a function of quantity and quantity as a function of price. (Hint: Set P = MR = MC to find each firms supply curve.)

SOLUCIN Cada compaa suministrar la salida hasta el punto donde MR = MC. Debido a que P=MR en este mercado. Las ecuaciones pedidas son:

Para OLYMPIA:

Y en trminos de P, tenemos

La grfica de P es la siguiente:

Para YAKIMA:

Y en trminos de P, tenemos

La grfica de P es

B.

Calculate the quantity supplied by each firm at prices of $325, $350, and $375. What is the minimum price necessary for each individual firm to supply output?

SOLUCIN La cantidad ofrecida a cada precio correspondiente es: Para OLYMPIA: a) P=$325

) , Esto no puede suceder, en general se debe cumplir

b) P=$350

, este valor slo indica el equilibrio.

c) P=$375

Para YAKIMA: P=$325

b) P=$350

c) P=$375

Para Olimpia, MC = $ 350 implica Qo = 0. Debido a que el costo marginal aumenta con la produccin, Olympia nunca suministrar la salida a menos que de un precio de ms de $ 350 por unidad. Dado que la salida negativa no es factible en el caso a) cuando P=325, Para Olympia el precio no es factible cuando ste sea . Del mismo modo, MCY = $ 150 implica QY = 0. Por lo tanto, Yakima nunca suministrar salida a menos que un precio de ms de $150 por unidad, de lo contrario Q ser negativa.

C.

Assuming these two firms make up the entire industry in the local area, determine the industry supply curve when P < $350.

SOLUCIN Cuando decir: , slo Yakima puede suministrar de forma rentable la produccin. Es

O bien

D.

Determine the industry supply curve when P > $350. To check your answer, calculate quantity at an industry price of $375 and compare your result with part B.

SOLUCIN Cuando , tanto Olympia como Yakima pueden suministrar la produccin. Para derivar la curva de oferta de las industrias en estas circunstancias, slo hay que sumar las cantidades suministradas por cada empresa, a saber:

Comprobaremos con P=$375 ( )

Lo cual se confirma con lo obtenido en B, ya que

Association. Producers in the area are able to switch back and forth between potato and wheat production depending on market conditions. Similarly, consumers tend to regard potatoes and wheat (bread and bakery products) as substitutes. As a result, the demand and supply of Eye-de-ho Potatoes are highly sensitive to changes in both potato and wheat prices. Demand and supply functions for Eye-de-ho Potatoes are as follows: QD QS = -1,450 - 25P + 12.5PW + 0.1Y, = -100 + 75P - 25PW - 12.5PL + 10R, (Demand) (Supply)

where P is the average wholesale price of Eye-de-ho Potatoes ($ per bushel), PW is the average wholesale price of wheat ($ per bushel), Y is income (GDP in $ billions), PL is the average price of unskilled labor ($ per hour), and R is the average annual rainfall (in inches). Both Q D and QS are in millions of bushels of potatoes. A. When quantity is expressed as a function of price, what are the Eye-de-ho Potatoes demand and supply curves if PW = $4, Y = $15,000 billion, PL = $8, and R = 20 inches?

SOLUCIN Cuando la cantidad es expresada en funcin del precio la curva de demanda para esta empresa est dada por:

Sustituyendo

e ( )

tenemos: ( )

Cuya grfica es:

Cuando la cantidad es expresada en funcin del precio la curva de oferta para esta empresa est dada por:

Sustituyendo valores, tenemos: ( ) ( ) ( )

La grfica correspondiente es:

B.

Calculate the surplus or shortage of Eye-de-ho Potatoes when P = $1.50, $2, and $2.50.

SOLUCIN

Precio

Cantidad Ofertada

Cantidad Demandada

Supervit o Dficit Dficit 0 50Supervit

$1.50 $2 $2.50

( ) ( ) ( )

( ( (

) ) )

C. SOLUCIN:

Calculate the market equilibrium price/output combination.

El precio de equilibrio se encuentra igualando la cantidad demandada a la cantidad ofertada y resolviendo dicha ecuacin para P. Esto es:

Sustituyendo este valor (P=2) en ( ) (en millones)

( ) (en millones) Lo cual verifica que , garantizando as el equilibrio del precio.