1. Draft or develop an Economic Analysis on Film Industry

2. A firm purchased copper pipes a few years ago at $10 per pipe and stored them, using them only as the need arises. Currently, the price of the pipes in the resale market is $8 per pipe. What is the opportunity cost of storing each pipe and what is the sunk cost per pipe of the purchase?

3. A bottling company uses two inputs to produce bottles of the soft drink Sludge: bottling machines (K) and workers (L). The isoquants have the usual smooth shape. The machine costs $1,500 per day to run and the workers earn $300 per day. At the current level of production, the marginal product of the machine is 180 bottles per day and the marginal product of labor is 45 more bottles per day. Is this firm producing at minimum cost? If it is minimizing cost, explain why. If it is not minimizing cost, explain how the firm should change the ratio of inputs it uses to lower its cost. (Hint: Examine the conditions for minimizing cost in Equations 6.8, 6.9 and 6.10 in the textbook.)

4. A U.S. electronics firm is considering moving its production to a plant in Mexico. Its estimated production function is Q=LK, where = and = . Note that + = 1. U.S. factor prices are w = r = 10. In Mexico the wage is half that in the United States, but the firm faces the same cost of capital. What are L and K when Q = 100, and what is the cost of producing 100 units in both countries? To help with the math, the marginal product of labor is (K/L)^1- and the marginal product of capital is (L/K)^1-.

5. A firm has revenue given by R(q) = 250q - 5q² and its cost function is C(q) = 120 + 20q. Using simple calculus, marginal revenue is equal to 250 - 10q and marginal cost is equal to 20. What is the profit-maximizing level of output? What profit does the firm earn at this output level? (Hint: See Q&A 7.1 in the textbook.)

6. Peter, the owner, makes the same offer to the manager at each of his stores: "At the end of the year, give me $30,000 and you can keep any excess over half the store's profit." Ann, a manager at one of the stores, gladly agrees, knowing that half the store's profit will easily exceed $30,000 if it is well run. If Ann is interested in maximizing her personal earnings, will Ann act in a manner that maximizes the store's total profit? The store's revenue function is R = 7000q - 70q² and its cost function is C = 700 + 70q.

7. Milton Friedman argued that managers should try to maximize profit. Does this view conflict with the action taken by senior executives of McDonald's to use corporate resources to support Ronald McDonald House projects? Explain.