1. A firm has determined that the cost equation for its Winkle division is
C = 1500+ 60Q + .3Q2. The demand equation is P = 100-.2Q.

What should the firm do in the short and long run?

2.Cheatem Insurance Company is trying to sell a loaded term policy in a new market. Their surveys have developed the following regression analysis.
Q= 175 - .3 PT - .1 A + .2 Y + .2 W.
(17) (.02) (.19) (.07) (.08)
Where:
PT = price of the term policy, price of term is $80, A = Age of sample age = 32, Y = Income of sample, income is 20,000, W = Whole life policy price of whole life is $200. The R2 is .856

Is this analysis reliable? Which are the dependent and the independent variables? Which of the coefficients are significant and which are not? How many insurance policies can this company expect to sell? Is the whole life policy a substitute or a complement product? What does the R2 figure mean?

3. Badyear Rubber has developed the following input costs for their truck and bicycle tires. The same rubber is used for both products. Given the constraints they face, how many units of rubber should be used for truck tires and how many should be used for bicycle tires?
Y= 2 RT-.001 RT2 K = 20 RB - .01 RB2
RT and RB = 1300 PB = 25 PT = 100

4.Dingle Durbin's Dairy Duds has developed the following production function for its new Ditzy Darling Daffy Dessert.
Q = 40L - L2 + 54K - 1.5 K2
The input costs are as follows PL = 10 PK = 15
The price of the dessert is $1.
They have the opportunity to go to the Smoketown Street Festival this Sunday and sell their new delightfully delicate delicious dairy dessert. They estimate that they will be able to sell about 40 desserts per hour for the 10 hours they are there. But there's a problem. Ditzy Dan Durbin, the owner forgot to go to the bank and he only has $260 in cash. The entrance fee is $200 and while the labor can be paid after the festival all the materials will have to be paid up front out of the remaining $60. Do they have enough money to show a profit at the festival?