1. Solve for profit maximizing q (or q*) given a cost function of: C = 90q - 5q to the 2^nd power + .3q to the third power + 480. The price of the product is $90 (assume the price is = to MR; perfectly competitive market). Calculate MC, set this equal to P and solve for q*. What is the profit at q*? Calculate AVC. What is the minimum AVC for this company? Should this company continue to produce in the short run, why?
2. If country A can produce a maximum of 20 guns or 50 butter, whereas country B can produce a maximum of 40 guns or 70 butter (both countries have 100 hours of labor), should these countries trade? Draw the PPF of both, calculate a fair terms of trade, and draw the production point and trade line on each PPF. Who are the winners and losers for country A and B?
3. Calculate the stock price before and after the takeover, given: the Target Company's cash flow is $3 million before the M&A and $6 million after the M&A; the cost of capital is 9% before and 11% after the M&A; the growth rate is 3% before and 4% after the M&A; the company debt is $20 million before and $30 million after the M&A; and the company has 1 million shares of stock outstanding before and after the M&A.
4. If you salary was $45K in 1994; $62K in 2000; and $76K in 2015; calculate your nominal and real income if the CPI was .84 in 1994, 1.00 in 2000, and 1.4 in 2015.
5. Given 5 workers (adding 1 at a time): Output increases 120, 260, 360, 440, 480; Wage rate is $1,000; Output price is a constant $20. Calculate MP of labor; Marginal Revenue Product; and Profit when adding each additional worker
6. Why do countries protect some industries from international trade