Problem 2
(a) Snark International borrows \(£ 50000\) from the bank and increases its inventories. How does this affect its balance sheet (shown in the table below)? (b) How would interest on the loan appear in the income statement of Snark International?
Problem 5
Why are these statements wrong? (a) Firms with an accounting profit must be thriving. (b) Firms do not know their marginal costs. A theory of supply cannot assume that firms set marginal revenue equal to marginal cost. (c) To maximize profit, maximize sales.
Problem 9
A firm faces the following linear inverse demand for its product, \(P=60-2 Q\), Find the firm's total revenue function, \(T R(Q)\). Plot the total revenue function, (Hint: using \(P=60-2 Q\), plot a demand schedule for an arbitrary number of quantities - say, from 5 to 25 in fives.)
Problem 12
Essay question 'The industrial revolution was built on the ability of entrepreneurs to float companies and obtain funding. Today, it is often argued that stock exchanges force firms to be focused too much on the short term, making it hard to raise long-term funds. Private equity firms see themselves as addressing this shortcoming of stock markets. The amazing thing about private equity is not its recent appearance but that it took so long to appear.' Discuss.
Problem 13
A firm faces the following linear demand for its product, \(Q D=30-P / 2\). The firm has a marginal cost of production given by \(M C=8\). Find the expression for the firm's marginal revenue. Plot the \(M C\) and \(M R\) curves on a graph. What is the amount of output that the firm should produce? At what price is the output sold?
