Question1: A firm has the following total cost function: TC=q3-10q2+40q A) Find
ID: 1094478 • Letter: Q
Question
Question1: A firm has the following total cost function: TC=q3-10q2+40q
A) Find MC and AC.
B) If this firm is in a competitive product market, how much with they produce if the price is $20?
C) How much profit will this firm earn if the price is $20?
D) If this firm is in a competitive product market, what is the lowest price that the firm would accept in the long run?
Question 2: Sally has income of $120 a year. She also has a 60% chance (p=0.60) of losing $100 during the year. Her utility as a function of income is: U= I1/2
A) What is the expected value of her income?
B) What is the expected value of her utility?
C) What is the actuarially fair price of insurance against this risk?
D) Explain why Sally would or would not purchase insurance at the actuarially fair price.
Question 3: Here
Explanation / Answer
Output
Total cost
Marginal cost
Average cost
0
0
0
0
1
31
31
31
2
48
17
24
3
57
9
19
4
64
7
16
5
75
11
15
6
96
21
16
7
153
57
21.8
a) Total cost = Q3- 10Q2+40Q
b) Profit = Total revenue
Output
Total cost
Marginal cost
Average cost
0
0
0
0
1
31
31
31
2
48
17
24
3
57
9
19
4
64
7
16
5
75
11
15
6
96
21
16
7
153
57
21.8
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