Problem 1: A perfectly competitive firm has total revenue and total cost curves given by:
TR = 100Q
TC = 5000 + 2Q + 0.2Q^2
(a) Find the profit-maximizing output for the firm
(b) What profit does the firm make?
Problem 2: Mergers result in an increased economic efficiency. Discuss the economic justification (i.e., incentives) for a merger. List and define at least THREE reasons/incentives for firms to merge.
Problem 3: Company A has a beta of 1.3. The risk-free rate of interest is 6% and the rate of return on a market portfolio is 14%. Based on the Capital Asset Pricing model, what is the required rate of return on Company A's stock?