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irakobra [83]
3 years ago
10

Consider an industry in which chief executive ocers (CEOs) run rms. There are two types of CEOs: exceptinal and average. There i

s a fixed supply of 100 exceptional CEOs and an unlimited supply of average CEOs. Any individual capable of being a CEO in this industry is willing to work for a salary of $144,000 per year.
The long-run total cost of a rm that hires an exceptional CEO at
this salary is

CE(Q) =(144 + 1/2Q^2 if Q > 0
0 if Q = 0
where Q is annual output. The long-run total cost for a firm that hires an average CEO for $144,000 per year is CA(Q) = 144 + Q^2 of Q > 0 and 0 otherwise. The market demand curve in this market is D(P) = 7, 200 - 100P. Let n be the number of firms run by average CEOs in the industry.

a) What is the minimum e efficient scale for a firm run by an average CEO? What is the minimum level of long-run average cost for such a firm?

b) What is the long-run equilibrium price in this industry, assuming that it consists of firms with both exceptional and average CEOs?

c) At this price, how much output will a firm with an average CEO produce? How much output will a firm with an exceptional CEO produce?

d) At this price, how much output will be demanded?

e) Using your answers to parts (c) and (d), determine how many firms with average CEOs will be in this industry at a long-run equilibrium.

f) Assuming that firms bid against each other for the services of exceptional CEOs, what would you expect their salaries to be in a long-run competitive equilibrium?

Business
1 answer:
klemol [59]3 years ago
8 0

Answer

The answer and procedures of the exercise are attached in the following 3 images.

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in 3  sheets with the formulas indications.  

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Answer:

- BEP in unit: 4,000 units;

- In case fixed cost increases by 10%, New BEP in unit: 4,400 units.

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- BEP in units if sale price to decrease : 8,000 units => Price change should not take place as it moves the company from making 1 million peso profit to a loss as sales in units (1,200 + 5,000 =6,200) is lower than break-even point ( 8,000 units).

Explanation:

Please find detailed calculations as below:

- BEP in unit is calculated as Fixed cost/ Margin earned by one product = 4,000,000/(3,000 - 2,000) = 4,000.

- New BEP in unit is calculated as  New Fixed cost/ Margin earned by one product = (4,000,000 x 1.1)/(3,000 - 2,000) = 4,400.

- Net income: Sales - fixed cost - variable cost = 3,000 x 5,000 - 4,000,000 - 2,000 x 5,000 = 1,000,000 p

- BEP in units if sale price to decrease: Fixed cost/ Margin earned by one product = 4,000,000/(2,500 - 2,000) = 8,000.

4 0
3 years ago
Is the type of competition that occurs in a competitive market without identical producers.
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Answer:

Monopolistic

Explanation:

The type of competition that occurs in a competitive market without identical producers is a monopolistic one.

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Suppose a commercial banking system has $40,000 of outstanding checkable deposits and actual reserves of $4,500. If the reserve
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Answer: $50000

Explanation:

Based on the information that's been given in the question, firstly we need to calculate the excess reserves which will be:

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Then, the money supply that's expanded will be:

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econd Street, Inc. has 7 units in ending merchandise inventory on December 31. The units were purchased in November for $180 eac
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D

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