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pogonyaev
3 years ago
9

A firm producing good Y recently increased monthly production from​ 1,500 units to​ 2,000 units. This had no impact on the marke

t price of good Y. At the new production level of​ 2,000 units, the​firm's average cost is​ $3.5 while its marginal cost of production is​ $4. The marginal revenue however is fixed at​ $5 for all levels of output. Jake Williamson is the operations head of the firm. Jake feels​ that, since the firm has the​ capacity, it should have increased production further to​ 2,500 units which would have maximized profits. On the other​ hand, Mathew Hayden of the market research team anticipates an increase in price to​ $5.5 in the near future. He therefore claims that the firm may not be maximizing economic profit in the short run even at​ 2,500 units.
Which of the following is most strongly implied by this​information?
A. At the current level of​ production, the firm is making a profit of​ $3,000.
B. The current price of good Y is equal to​ $4.
C. Mathew feels that the demand curve faced by the firm will shift downward.
D. Jake thinks that at the production level of​ 2,500 units, the average cost of producing Y will be equal to the market price.
E. The demand curve currently faced by the firm is horizontal at​$4.
Business
1 answer:
MAVERICK [17]3 years ago
7 0

Answer:

A. At the current level of​ production, the firm is making a profit of​ $3,000.

Explanation:

Units produced at first scenario 1500

Units produced at second scenario 2000

$3.5 average cost

$4 marginal cost

$5 marginal revenue x 2000 units=$10.000

(-) $3.5 x 2000 units                        =$7.000

_____________________________________

Profit                                                  =$3000

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3 years ago
The range of S is 74 while that of P is 37 across the two states. What is the hedge ratio of the put
lorasvet [3.4K]

This question is incomplete, the complete question is;

We will derive a two-state put option value in this problem.

Data: S₀ = 106; X = 112; 1 + r = 1.12. The two possibilities for ST are 149 and 75.

The range of S is 74 while that of P is 37 across the two states. What is the hedge ratio of the put

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Explanation:

Given that;

S₀ = 106, X = 112, 1 + r = 1.12

Us₀ = 149 ⇒ Pu = 0

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To find the Hedge ratio using the expression

H = Pu - Pd /Us₀ - ds₀

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