ECON 203 Lecture 7: Principles of Macroeconomics
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Using the table below:
Recommend production levels and forecast profits for two computer chip price scenarios:
The price of 32 MB RAM chips reaches $62 per chip &
The price of 32 MB RAM chips falls to $35 per chip
Determine the price below which the company should shut down operations in the short run.
How many chips should be produced (monthly) if chip prices are $62 per chip?
How many chips should be produced (monthly) if chip prices are $35 per chip? Forecast the profit at this output level.
At what price should the company shut down and produce no chips in the short run?
Month | Monthly Production of finished Product | Business License & Fees | Insurance Premiums | Building Lease Payment | Materials Expense | Telephone | Energy Expense | Wage Expense |
Nov-98 | 875 | 0 | 0 | 3570 | 9690 | 945 | 7230 | 12250 |
Dec-98 | 670 | 0 | 0 | 3570 | 6700 | 945 | 5115 | 8995 |
Jan-99 | 1675 | 6000 | 2200 | 3570 | 16295 | 945 | 12884 | 23106 |
Feb-99 | 1155 | 0 | 0 | 3570 | 11285 | 945 | 9240 | 15225 |
Mar-99 | 1845 | 0 | 0 | 3570 | 16550 | 945 | 14220 | 24530 |
Apr-99 | 1650 | 0 | 0 | 3570 | 16230 | 945 | 12700 | 21600 |
May-99 | 1955 | 0 | 0 | 3570 | 19626 | 945 | 15640 | 27484 |
Jun-99 | 2845 | 0 | 0 | 3570 | 27410 | 945 | 22760 | 39830 |
Jul-99 | 2265 | 0 | 2200 | 3570 | 20526 | 945 | 1724 | 31225 |
Aug-99 | 3470 | 0 | 0 | 3570 | 34176 | 830 | 25760 | 48564 |
Sep-99 | 3665 | 0 | 0 | 3570 | 36726 | 830 | 28720 | 50094 |
Oct-99 | 3750 | 0 | 0 | 3570 | 42576 | 830 | 32000 | 54474 |
Nov-99 | 4595 | 0 | 0 | 3570 | 48226 | 830 | 37260 | 66414 |
Dec-99 | 4060 | 0 | 0 | 3570 | 41095 | 830 | 33155 | 57840 |
Jan-00 | 3575 | 7200 | 2450 | 4200 | 34550 | 830 | 27400 | 50050 |
Feb-00 | 4380 | 0 | 0 | 4200 | 41800 | 830 | 34460 | 61320 |
Mar-00 | 5575 | 0 | 0 | 4200 | 81750 | 830 | 54600 | 82150 |
Apr-00 | 7870 | 0 | 0 | 4200 | 92360 | 830 | 102960 | 130180 |
May-00 | 6750 | 0 | 0 | 4200 | 89576 | 830 | 70000 | 109774 |
3. A decision at the margin
Van is a hard-working college senior. On Thursday, he decides to work nonstop until he has answered 200 practice problems for his economics course. He starts work at 8:00 AM and uses a table to keep track of his progress throughout the day. He notices that as he gets tired, it takes him longer to solve each problem.
Time | Total Problems Answered |
---|---|
8:00 AM | 0 |
9:00 AM | 80 |
10:00 AM | 140 |
11:00 AM | 180 |
Noon | 200 |
Use the table to answer the following questions.
The marginal, or additional, gain from Van's first hour of work, from 8:00 AM to 9:00 AM, is:
The marginal gain from Van's third hour of work, from 10:00 AM to 11:00 AM, is:
Later, the teaching assistant in Van's economics course gives him some advice. Based on past experience, the teaching assistant says, working on 30 problems raises a student's exam score by about the same amount as reading the textbook for 1 hour. For simplicity, assume students always cover the same number of pages during each hour they spend reading.
Given this information, in order to use his 4 hours of study time to get the best exam score possible, how many hours should he have spent working on problems, and how many should he have spent reading?
1 hour working on problems, 3 hours reading
2 hours working on problems, 2 hours reading
3 hours working on problems, 1 hour reading
4 hours working on problems, 0 hours reading