1. A firm will have constant profits of $100,000 per year for the next four years and the interest rate is six percent. Assuming these profits are realized at the end of each year, what is the present value of these? a. $325,816 b. $376,741 c. $400,000 d. $346,511
2. The demand for video recorders has been estimated to be QV = 134 - 1.07PF + 46PM -2.1PV - 5I, where QV is the quantity of video recorders, PF denotes the price of video recorder film, PM is the price of attending a movie, PV is the price of video recorders, and I is income. Based on the estimated demand equation we can conclude: a. Video recorders are inferior goods b. Video recorder film is a substitute for video recorders c. The demand for video recorders is inelastic d. The demand for video recorders are neither inferior nor inelastic and video recorder film is not a substitute for video recorders
3. Consider a market characterized by the following inverse demand and supply functions: PX = 10 - 2QX and PX = 2 + 2QX? Compute the surplus received by consumers and producers. a. $24 and $24, respectively b. $4 and $4, respectively c. $2 and $6, respectively d. $6 and $2, respectively