1 / 2

DRQ #2 AGEC 317 4pts September 5 , 2013

DRQ #2 AGEC 317 4pts September 5 , 2013.

alanna
Download Presentation

DRQ #2 AGEC 317 4pts September 5 , 2013

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. DRQ #2AGEC 317 4pts September 5, 2013 • 21st Century Insurance offers internet-order automobile insurance to preferred-risk drivers in the Los Angeles area. The company is the low-cost provider of insurance in the market. But, the company believes its $750 annual premium cannot be raised in order to remain competitive. Subsequently, its rates are expected to remain stable, hence P=MR=$750. The total cost relationship for the company is given as: TC = $2,500,000 + $500Q + $0.005Q2, where Q corresponds to the number of policies sold. (a) Calculate the profit-maximizing number of policies sold. 25,000 (b) Calculate the company’s optimal profit level. 625,000 (c) Calculate the profit margin. 3.33% TR = 18.75 MIL 2 pts ½ pt ½ pt

  2. DRQ #2AGEC 317 4pts September 5, 2013 • Suppose that U = ln y + 3y, where U is utility and y is income. (a) Derive the marginal utility of income MU = + 3 (b) Is this utility function consistent with the law of diminishing marginal utility? Yes as y ↑ MU↓

More Related