(d)Now shade the area that represents feasible combinations of dailyproduction of apples and cider for Allie’s Apples.0300400500100200300400500600100CiderIn the diagram below, draw an isoprofit line for each of the threeperiods, showing combinations of input and output that would yield thesame profits that period as the combination actually chosen. What arethe equations for these three lines?y=x,y= 1 +.5x,y= 2 +.25x.Using the theory of revealed profitability, shade inthe region on the graph that represents input-output combinations thatcould be feasible as far as one can tell from the evidence that is available.How would you describe this region in words?The region thatis below all 3 isoprofit lines.200Apples600Blue lineBlack revenue lineRed lineBlack line(e)Allie’s can sell apples for $5 per box of apples and cider for $2 perjug. Draw a black line to show the combinations of sales of apples andcider that would generate a revenue of $1,000 per day.At the profit-maximizing production plan, Allie’s is producing200boxes of applesand0jugs of cider. Total revenues are$1,000.NAME24719.6 (0)T-bone Pickens is a corporate raider. This means that he looksfor companies that are not maximizing profits, buys them, and then triesto operate them at higher profits.T-bone is examining the financialrecords of two refineries that he might buy, the Shill Oil Company andthe Golf Oil Company. Each of these companies buys oil and producesgasoline.During the time period covered by these records, the price ofgasoline fluctuated significantly, while the cost of oil remained constantat $10 a barrel. For simplicity, we assume that oil is the only input togasoline production.Shill Oil produced 1 million barrels of gasoline using 1 million barrelsof oil when the price of gasoline was $10 a barrel.When the price ofgasoline was $20 a barrel, Shill produced 3 million barrels of gasolineusing 4 million barrels of oil. Finally, when the price of gasoline was $40a barrel, Shill used 10 million barrels of oil to produce 5 million barrelsof gasoline.Golf Oil (which is managed by Martin E. Lunch III) did exactly thesame when the price of gasoline was $10 and $20, but when the priceof gasoline hit $40, Golf produced 3.5 million barrels of gasoline using 8million barrels of oil.246PROFIT MAXIMIZATION(Ch.19)19.5 (0)A profit-maximizing firm produces one output,y, and uses oneinput,x, to produce it.The price per unit of the factor is denoted bywand the price of the output is denoted byp.You observe the firm’sbehavior over three periods and find the following:Periodyxwp1111122.53.51

(a)Write an equation that gives the firm’s profits,π, as a function of theamount of inputxit uses, the amount of outputyit produces, the per-unitcost of the inputw, and the price of outputp.

(b)In the diagram below, draw an isoprofit line for each of the threeperiods, showing combinations of input and output that would yield thesame profits that period as the combination actually chosen. What arethe equations for these three lines?y=x,y= 1 +.5x,y= 2 +.25x.Using the theory of revealed profitability, shade inthe region on the graph that represents input-output combinations thatcould be feasible as far as one can tell from the evidence that is available.How would you describe this region in words?The region thatis below all 3 isoprofit lines.06810246810122Output4NAME24719.6 (0)T-bone Pickens is a corporate raider. This means that he looksfor companies that are not maximizing profits, buys them, and then triesto operate them at higher profits.T-bone is examining the financialrecords of two refineries that he might buy, the Shill Oil Company andthe Golf Oil Company. Each of these companies buys oil and producesgasoline.During the time period covered by these records, the price ofgasoline fluctuated significantly, while the cost of oil remained constantat $10 a barrel. For simplicity, we assume that oil is the only input togasoline production.Shill Oil produced 1 million barrels of gasoline using 1 million barrelsof oil when the price of gasoline was $10 a barrel.When the price ofgasoline was $20 a barrel, Shill produced 3 million barrels of gasolineusing 4 million barrels of oil. Finally, when the price of gasoline was $40a barrel, Shill used 10 million barrels of oil to produce 5 million barrelsof gasoline.Golf Oil (which is managed by Martin E. Lunch III) did exactly thesame when the price of gasoline was $10 and $20, but when the priceof gasoline hit $40, Golf produced 3.5 million barrels of gasoline using 8million barrels of oil.Input12Period 3Period 2Period 1