Question 1. A firm is expected to earn $10,000, $25,000, $48,000, and $75,000 during the next four years, after which it will be dissolved. What is the present value of the firm if the discount rate is 8%?
Question 2. Jane has compiled the following list of expenses after completing one year of college. Assume that Jane would be living with her parents and working if she weren't attending college. Use this information to calculate Jane's economic cost of attending college for one year.
Tuition $ 8,000
Dormitory room 4,000
Books and supplies 1,000
Food plan 3,000
Foregone income 19,000
Entertainment expenses 1,000
Clothing 2,000
Health insurance 1,000
Question 3. A firm's demand function is defined as Q = 30 - P. Use this function to calculate total revenue when price is equal to 5 and when price is equal to 6. What is marginal revenue equal to between P=5 and P=6. (Hint: total revenue = P x Q and marginal revenue = change in total revenue / change in quantity)
Question 4. Use the demand schedule that is presented in the table below to determine the optimal rate of production and price when the firm has the following marginal cost function: MC = 1 + Q. (Hint: the firm should produce the product as long as MR is greater than or equal to MC)
Quantity 1 2 3 4 5 6 7 8 9 10
Price 80 60 48 40 34 29 25 20 15 10