Cruise Shoes has the capacity to produce up to x pairs of shoes weekly (s ee ch.

Question

Cruise Shoes has the capacity to produce up to x pairs of shoes weekly (see ch. 6 case). It currently produces women's shoes with a cost structure given by CW = a + bQW + d QW2 and faces a perfectly competitive market which prices women's shoes at $y per pair. Cruise retains you to advise it about adding a line of girls' shoes, production costs for which are given byCG = f + g QG + h QG2. Demand for these girls' shoes is estimated to be: QGd = k - lPG. a) Calculate Cruise's maximum profit when making both types of shoes, with its current capacity. b) What production capacity would maximize profits for Cruise Shoes?

4. MARGINAL VS. AVERAGE ANALYSIS IN PRODUCTION

The City of Lake Orion issues licenses to 20 individuals to fish in its two lakes.

The daily fish catch at Lakes 1 and 2 respectively are given as follows:

Lake 1:Q1 = 16L1- 0.4L12 and Lake 2: Q2 = 10L2 - 0.1L22,

where Q is the fish catch, and L is the number of fishermen, at a given lake.

a) Determine the total daily fish catch at the lakes

(i) if equal numbers of fishers fished in each of the two lakes.

(ii) if the 20 fishermen want to maximize their fish catch.

5. Store Location: the problem related to "adding a new franchise"

Explanation / Answer

There is no doubt that the central bank has the ability to use its policy instruments to

help dampen economic cycles and promote price stability. However, at the same time, the very

statements of the central bank are extremely important for forming expectations of the

country’s future economic performance and thus can influence inflation even if the policy

instruments are not changed. For example, if a fixed exchange rate regime is in effect, a

statement from the central bank announcing the possible depreciation of the national currency

will result in growing inflationary expectations, which, in their turn, will result in escalating

inflation, even if the central bank does not in fact allow the currency to depreciate. Therefore,

the central bank must insure that it follows through on its statements in order to maintain

public confidence in the monetary authorities.

A major task of central banks is to conduct monetary policy. This usually implies

issuing currency, holding the country’s foreign reserves, acting as banker to the government,

serving as a lender of last resort, and, most importantly, controlling the money supply.

Traditionally, this policy was aimed at achieving six basic goals: high employment, economic

growth, price stability, and interest-rate stability, stability of financial markets and stability of

foreign exchange markets. Some of these goals are consistent with each other, some are

preconditions for the others, and some are mutually conflicting. For example, inflation that is

either too high or too low (especially deflation) can hamper growth, increase unemployment,

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