Suppose that the lifetime of a notebook (in years) is uniformly distributed over (0, 5). John...

 

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Suppose that the lifetime of a notebook (in years) is uniformly distributed over (0, 5). John follows a rule that he buys a new notebook as soon as his old one either breaks down or reaches the age of 7 years, where T is a predetermined constant and T≤5. Suppose that a new notebook costs RM5,000 and also that an additional cost of RM500 is incurred whenever his notebook breaks down. Assume that a used notebook has no resale value. (i) What is John's long-run average cost? (ii) What value of T'minimises John's long-run average cost? (6 marks) (4 marks) Suppose that the lifetime of a notebook (in years) is uniformly distributed over (0, 5). John follows a rule that he buys a new notebook as soon as his old one either breaks down or reaches the age of T years, where T is a predetermined constant and T ≤5. Suppose that a new notebook costs RM5,000 and also that an additional cost of RM500 is incurred whenever his notebook breaks down. Assume that a used notebook has no resale value. (i) What is John's long-run average cost? (ii) What value of T minimises John's long-run average cost? (6 marks) (4 marks) Suppose that the lifetime of a notebook (in years) is uniformly distributed over (0, 5). John follows a rule that he buys a new notebook as soon as his old one either breaks down or reaches the age of 7 years, where T is a predetermined constant and T≤5. Suppose that a new notebook costs RM5,000 and also that an additional cost of RM500 is incurred whenever his notebook breaks down. Assume that a used notebook has no resale value. (i) What is John's long-run average cost? (ii) What value of T'minimises John's long-run average cost? (6 marks) (4 marks) Suppose that the lifetime of a notebook (in years) is uniformly distributed over (0, 5). John follows a rule that he buys a new notebook as soon as his old one either breaks down or reaches the age of T years, where T is a predetermined constant and T ≤5. Suppose that a new notebook costs RM5,000 and also that an additional cost of RM500 is incurred whenever his notebook breaks down. Assume that a used notebook has no resale value. (i) What is John's long-run average cost? (ii) What value of T minimises John's long-run average cost? (6 marks) (4 marks)

Answer rating: 100% (QA)

To solve this problem we need to calculate Johns longrun average cost and then find the value of T t... View the full answer