ECO 403 GDB Solution

ECO 403 GDB Solution

Semester 2011

Unemployment is an economic problem as well as a social issue.
It affects the living of all the people in a society whether they are
young or old, educated or uneducated, skilled or unskilled. Why
unemployment is increasing day by day in Pakistan? Write down at
least one reason.

Answer:

Unemployment is increasing day by day in Pakistan due to many
reasons. Reasons are job search and wage rigidity in the country.

*Job search:
1. Workers have different abilities and preferences.
2. Jobs have different skill requirements.
3. Geographic mobility of workers.
4. Flow of information is imperfect.

*Wage rigidity:
1. Minimum wage laws.
2. Labor unions.
3. Efficiency wages.

• Sectoral shifts.
• Unemployment insurance (This is for European countries)

ECO 401 Assignment # 2 Solution

ECO 401 Assignment # 2 Solution

Semester 2011

Question:

A firm operating in competitive environment faces the following price (P),quantity (Q), total fixed cost (TFC) and total variable cost (TVC) schedules respectively:

A. Calculate total revenue (TR), marginal revenue (MR), total cost (TC),marginal cost (MC) and profit (π) for each level of output (Q).

Solution:-

Q	P	TFC	TVC	TR	MR	TC	MC	π
400	2.5	150	750	1000	—	900	—	100
500	2.25	150	830	1125	1.25	980	0.8	145
600	2	150	905	1200	0.75	1055	0.75	145
700	1.75	150	995	1225	0.25	1145	0.9	80

B. Find the optimal level of output and price which maximizes firm’s profit.

 

Answer:-

           As we know that profit is maximized at the point where MC = MR. The optimal level of Output (Q) and Price (P) at which maximizes firm’s profit is 600 and 2. 

FIN622 GDB Solution

FIN622 GDB Solution

WACC (when debt-equity ratio is 0.5) = 0.09%

WACC (when debt-equity ratio is 1.0) = 0.08%

WACC (when debt-equity ratio is 2.0) = 0.07%

Trend of WACC with increasing D/E ratio = Decreasing