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Old 07-20-2012, 09:38 PM    (permalink
jrdrylie
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I was an economics major although I didn't do too much with cost minimization in my studies. I also have some background in calculus so I might be able to help. Post the problem and I'll see if I know how to do it.
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Old 07-20-2012, 09:45 PM    (permalink
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So I am taking my first economics course in college... and well my first test came back an 80. I am a little disappointed by that, but anyway short-run and long run cost minimization is really giving me problems.

I have not taken calculus, so the derivative stuff is beyond me, but my professor focuses on that method so I am falling behind... the drop date was yesterday so now I am stuck. I fear the worst (which also includes me switching my major from business to something less math orientated)... worst part is I have no exercises or resources to practice with.

Would anyone like to spare some time to help me out? Any economics majors?

I would really appreciate it.
Get this book: Quick Calculus: A Self Teaching Guide. You might be able to find it in the library. It was written for MIT freshmen majoring in physics who needed a crash course in Calculus because they hadn't taken it in HS. It can get you to speed on differential calculus within a few days (if you're solid with Algebra).
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Old 07-20-2012, 09:51 PM    (permalink
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Economics is simple stuff. I'm a business major myself, it's not fun but just ask question and stick with it, it always makes sense.
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Old 07-20-2012, 10:32 PM    (permalink
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I was an economics major although I didn't do too much with cost minimization in my studies. I also have some background in calculus so I might be able to help. Post the problem and I'll see if I know how to do it.
That's the thing... I have no problems... no exercises... I can't practice. Meanwhile I am here on a Friday night trading time that I could be enjoying myself trying instead to improve myself.

My textbook just has zero numerical examples or problems. I just have like two numerical equations he did on the board, and they are already solved. I understand the concept of

MPL/w = MPK/r
and
Q= F(L,K)

I guess I'll just make one up then...

(Long run example)
F(L,K)= sqrt of 3L x K
w= $9
r= 12$



Short Run Example k is constant

F(L,K)= sqrt of K x L
w= $5
r= $10
K= $40
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Old 07-20-2012, 10:34 PM    (permalink
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Economics is simple stuff. I'm a business major myself, it's not fun but just ask question and stick with it, it always makes sense.
I understand the graphs and concepts and the general idea... then when we get into the equations and formulas I just get lost. :/
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Old 07-21-2012, 07:17 PM    (permalink
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A wheat farmer has total production costs given by the equation TC=600+2Q, where Q is output, measured in bushels of wheat.

a. What is the farmer's marginal cost (MC) of production?
b. What is the farmer's fixed cost? Give some examples of what costs might be fixed for a wheat farmer.
c. Write the equation giving the farmer's variable cost as a function of quantity. What are examples of
variable costs for a farmer?
d. Write the equations for the farmer's average total cost (ATC) and average variable cost (AVC).

Here is an actual one I got for homework, if anyone is willing to give it a go.
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Old 07-21-2012, 07:42 PM    (permalink
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a. Marginal cost is $2 because marginal cost is the cost of producing one more unit. So each time Q increases by one, TC increases by $2.

b. Fixed cost is $600 because even if Q=0, the cost to the farmer is still $600. An example of a fixed cost is the mortgage he pays for his farm. Others might be salaries of non-hourly employees.

c. Variable cost I believe is just total costs minus fixed costs. So the formula is VC=TC-FC. For example, lets say the farmer produces 200 bushels (Q) of wheat. FC=$600. Q=200. So 600 + 2(200) = 1000 and thus variable costs are 400.

Variable costs include wheat seeds, labor costs, gasoline for the tractor, water bill used to water the land.

d. Average total cost is just total cost divided by Q. So it would be (600+2Q)/Q. In the example I used of Q = 200. That would be 1000/200, so ATC would be $5. AVC would just be $2 because this is a linear equation.
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Old 07-21-2012, 08:38 PM    (permalink
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a. Marginal cost is $2 because marginal cost is the cost of producing one more unit. So each time Q increases by one, TC increases by $2.

b. Fixed cost is $600 because even if Q=0, the cost to the farmer is still $600. An example of a fixed cost is the mortgage he pays for his farm. Others might be salaries of non-hourly employees.

c. Variable cost I believe is just total costs minus fixed costs. So the formula is VC=TC-FC. For example, lets say the farmer produces 200 bushels (Q) of wheat. FC=$600. Q=200. So 600 + 2(200) = 1000 and thus variable costs are 400.

Variable costs include wheat seeds, labor costs, gasoline for the tractor, water bill used to water the land.

d. Average total cost is just total cost divided by Q. So it would be (600+2Q)/Q. In the example I used of Q = 200. That would be 1000/200, so ATC would be $5. AVC would just be $2 because this is a linear equation.
The thing is he doesn't give me Q. VC = wages x labor + rent x capital. For C I don't know how to set up the equation for it.

Also are you sure I can just set Q to 0 to find MC and FC?

EDIT: For instance look at question 16

16. A local microbrewery has total costs of production given by the equation TC=500+10Q+5Q^2

This implies that the firm's marginal cost is given by the equation MC = 10 +10Q.
a. Write the equations showing the brewery's average total cost and average variable cost, each as a
function of Q.
b. Show the firm's MC, ATC and AVC on one graph.
c. What is the quantity produced at which the firm’s ATC is minimized?
d. What is the quantity produced at which the firm’s AVC is minimized?

It implies the MC = 10+10Q

*By the way these are just practice problems, you aren't just doing my homework for me I. I just legitimately need help.
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Old 09-20-2012, 08:27 PM    (permalink
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Any Econ guys in here? I'm pretty sure this is easier than I'm making it...

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Old 02-10-2013, 12:12 AM    (permalink
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Would anyone like to take a crack at this stats problem? Part C is killing me but feel free to check over my answers for parts a and b :).

Wallen Accounting Services 9% of their tax returns selected for audit. Wallen has 6 new customers. Assume the chances of these 6 customers being audited are independent.

(a) What is the probability that all 6 new customers will be selected for audit?

(.09)^6= .0000005

(b) What is the probability that none of the 6 new customers will be selected for audit.

1-.09=.91

.91^6= (approx.) .569

(c) What is the probability that exactly one of the six new customers will be selected for audit?

Here is where I am stuck, I did come up with an answer but have no idea if it is correct.

First I did: 1-.569 to get .431

Then since there are 6 independent people who can be audited I divided .431 to get .07183.

I then subtracted .07183 fro, .431 to get .3591666667

I am really unsure if that is the right answer :/ I am sure its probably really simple, but please someone explain what I might be doing wrong. Thanks!
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Old 02-10-2013, 12:35 AM    (permalink
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p = probability of audit = .09

n = probability of no audit = .91

(p + n)^6

6Combination5(pn^5)

6 * .09 * .91^5 = .336977 <--answer


Subtract 1 from P and that will always be your N

memorize your formula's malaka statistics is easy, if you know your formula's it's just plug and calculate.
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Old 02-10-2013, 12:42 AM    (permalink
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I have a finance problem that I'm probably over thinking.

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Old 02-10-2013, 10:51 AM    (permalink
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p = probability of audit = .09

n = probability of no audit = .91

(p + n)^6 Isn't this just one?

6Combination5(pn^5) How did you get this? Where did the combo come from?

6 * .09 * .91^5 = .336977 <--answer


Subtract 1 from P and that will always be your N

memorize your formula's malaka statistics is easy, if you know your formula's it's just plug and calculate.
Thanks Bantx! I bolded some questions I had above.

The two rules I have been taught for probability right now are

Gen. Addition Rule: P(A) + P(B) - P(A AND B)

Multiplication Rule: P(A and B)= P(A)P(B)

With those two formulas I have no idea how to get the function you showed me :/

And Bosanac, is there any inflation involved? Or maybe I am thinking too much about economics, but you should probably just deflate the 10,000 using "today's" dollars. If not inflation then the interest is most likely compounded daily/monthly/weekly.

EDIT: Bantx I am given the formulas on the test lol.
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Old 02-10-2013, 01:39 PM    (permalink
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then it should be easy! Combination is in your calculator if you have a ti-30x it should be right next to your 2nd button over to the right one and under. You will see xCx it's just a quicker way to do the problem your professors is probably making you learn the hard way but this does all the work for you and makes it a lot easier. I didn't have to learn the hard way luckily so I can't explain how to set it up. I could but I'd prob get you more confused than you are.
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Old 02-10-2013, 02:38 PM    (permalink
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then it should be easy! Combination is in your calculator if you have a ti-30x it should be right next to your 2nd button over to the right one and under. You will see xCx it's just a quicker way to do the problem your professors is probably making you learn the hard way but this does all the work for you and makes it a lot easier. I didn't have to learn the hard way luckily so I can't explain how to set it up. I could but I'd prob get you more confused than you are.
I understand the combination and I know how to get it on my calculator but how did the exponent go from 6 to 5?
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Old 02-10-2013, 02:58 PM    (permalink
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since you're only looking for exactly 1 you subtract 1 from 6 that's where you get the 5. Say if you're looking for exactly 2 it will look like this

6 * .09 * .91^4

You always subtract the exact number from the total amount of N

I feel like it's harder for me to explain it on here lol, but hopefully you get it.
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Old 02-10-2013, 03:13 PM    (permalink
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No one want's to take a stab at my finance problem?
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Old 02-10-2013, 04:55 PM    (permalink
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since you're only looking for exactly 1 you subtract 1 from 6 that's where you get the 5. Say if you're looking for exactly 2 it will look like this

6 * .09 * .91^4

You always subtract the exact number from the total amount of N

I feel like it's harder for me to explain it on here lol, but hopefully you get it.
Thanks dude! I'll look for some practice problems to nail the concept.
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Old 02-10-2013, 08:28 PM    (permalink
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Originally Posted by Bosanac01 View Post
I have a finance problem that I'm probably over thinking.

Your problem is an NPV calculation by the looks of it.

Basically you have to discount the future money to the their present value. To discount you use the rate of return as the discount rate (Interest rate in this scenario) and then use the below formula.

I'm pretty rusty on NPV but I'd think it is this...

NPV = 3,000+8,000/(1+.06)^1+10,000/(1+.06)^2
= 3,000 + 7,547.17 + 8,899.96
= 19,447.13

Someone else can confirm it though.

Depending on the level of the course I'd check whether you are required to calculate the tax implications as well, but given that is a particularly basic looking question I'd assume not and normally on NPV calculations it's the tax shield impact of deductions that are factored in rather than tax payable.
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Old 02-10-2013, 08:57 PM    (permalink
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Originally Posted by wogitalia View Post
Your problem is an NPV calculation by the looks of it.

Basically you have to discount the future money to the their present value. To discount you use the rate of return as the discount rate (Interest rate in this scenario) and then use the below formula.

I'm pretty rusty on NPV but I'd think it is this...

NPV = 3,000+8,000/(1+.06)^1+10,000/(1+.06)^2
= 3,000 + 7,547.17 + 8,899.96
= 19,447.13

Someone else can confirm it though.

Depending on the level of the course I'd check whether you are required to calculate the tax implications as well, but given that is a particularly basic looking question I'd assume not and normally on NPV calculations it's the tax shield impact of deductions that are factored in rather than tax payable.
I got the answer couple of hours ago and you're exactly right. I was pretty much over thinking it.
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Old 02-10-2013, 09:56 PM    (permalink
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I got the answer couple of hours ago and you're exactly right. I was pretty much over thinking it.
Good to hear :)
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Old 02-10-2013, 10:16 PM    (permalink
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Good to hear :)
Thank you for attempting it. I may need some assistance with this later in the semester, I hope I can bother you a little bit if I'm stuck on something again. Always appreciated.
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Old 02-11-2013, 08:44 AM    (permalink
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Thank you for attempting it. I may need some assistance with this later in the semester, I hope I can bother you a little bit if I'm stuck on something again. Always appreciated.
You can try... my finance is pretty rusty but probably good for me to stay on top of it a bit :)

From the above question I'm guessing it's an introduction to finance type unit and if it's anything like the one I did, if you can get your head around NPV and discounted cash flows it will be smooth sailing, there are only so many ways they can change it.
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Old 02-11-2013, 08:56 AM    (permalink
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Just buy a financial calculator, Bos.
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Old 02-11-2013, 12:43 PM    (permalink
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Just buy a financial calculator, Bos.
I already did dammit, the **** is confusing. Im slowly learning how to use it.
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