Religious-pilgrimage system
Liza Julie 89
economic_problem_set_1__answers_.pdf
Economic Problems Set 1 (Answers) HRVA KFSC, Fall 2020
1. For the following data, determine and graph the values for total variable cost, total cost, total benefit, net benefit, and net utility gain. Assume that the security system can operate for 4 years.
a. Graph the Net Benefit and Total Cost functions. b. Show the performance rate that will maximize net utility gain.
-15000
-10000
-5000
0
5000
10000
15000
20000
25000
30000
5 10 15 20 25 30 35 40 45 50
Total Cost
Net Benefit
z(security performance)
C (average variable security cost)
S (unit benefit)
Preparedness Investment
Mitigation Investment
Total Variable Cost
Total Benefit Total Cost
Net Benefit
Net Utility Gain (NUG)
5 400 4000 20000 10000 1600 16000 21600 6000 -15600 10 300 3500 20000 10000 1200 14000 21200 4000 -17200 15 350 3000 20000 10000 1400 12000 21400 2000 -19400 20 320 2500 20000 10000 1280 10000 21280 0 -21280 25 350 2000 20000 10000 1400 8000 21400 -2000 -23400 30 400 1600 20000 10000 1600 6400 21600 -3600 -25200 35 600 1200 20000 10000 2400 4800 22400 -5200 -27600 40 900 800 20000 10000 3600 3200 23600 -6800 -30400 45 1500 400 20000 10000 6000 1600 26000 -8400 -34400 50 2000 200 20000 10000 8000 800 28000 -9200 -37200
2. For the following total revenue functions, TR(q, 0) and TR(q, A1), and total variable cost functions, TC(q, 0) and TC(q, P1),
a. Draw the total cost function and net revenue function. b. Draw the minimum total cost function c. Draw the maximum net revenue function d. Show the investments levels and production rate that maximizes the profit. e. Show how much this profit is.
q
$
TVC(q, 0)
TVC(q, P1)
P1
TR(q, 0)
A1
TR(q, A1)
q*
q
$ TVC(q, 0)=TC(q, 0)
P1
TR(q, 0) = NR(q, 0)
A1
TR(q, A1)
TVC(q, P1)
TC(q, P1) = TVC(q, P1) + P1 NR(q, A1) = TR(q, A1) – A1
Max Profit, Π
q*
Profit, Π is maximized when q = q* A = A1 P = P1
Minimum Total Cost, MTC(q, P1)
Maximum Net Revenue MNR(q, A1)
2. For the following security system with the following mitigation and preparedness investment abilities, determine
a. Draw the minimum total response-cost function. b. Draw the maximum net benefit function. c. Determine the levels of investment in mitigation, investment in
preparedness, and response-performance level that will generate the highest level of net utility gain for society.
z
$
TVC(z, 0)
TVC(z, P1)
P1
TB(z, 0)
G1
TB(z, G2)
P2
TVC(z, P2)
TB(z, G1)
G2
z
$
TC(z, 0) TC(z, P1)
P1
NB(z, 0)
G1
NB(z, G2)
P2
TC(z, P2)
NB(z, G1)
G2
z*
NUG is maximized when z = z* Preparedness Investment, P = P1 Mitigation Investment, G = G1
Minimum Total Cost, MTC(z, P1, P2)
Maximum Net Benefit, MNB(z, G1, G2)
Max NUG
