Economics of Enterprise Answers

Lori works in a flower shop, where she produces 10 floral arrangements per hour. She is paid $ 10 an hour for the first eight hours she works and $ 15 an hour for each additional hour she works. What is the firm’s cost function? What are its AC, AVC, and MC functions? Draw the AC, AVC, and MC curves.

Present a one-factor Ricardian model of two countries, A and B, trading two goods, X and Y, and discuss the gains of trade generated in this model.

Verbally and graphically present the benefits of trade from the perspective of the HO model. List and briefly explain two main implications of trade according to this model.

" More people means more resources" Comment on that statement

suppose of production possibilities frontier include the following combinations

cars washing machine
0 1000
100 600
200 0


Q.1 what is the cost of producing nd additional car when 150 cars are being produced?
Q/2 WHAT IS THE COST OF PRODUCING ND ADDITIONAL WASHING MACHINE WHEN 50 CARS ARE BEING PRODUCED? WHEN 150 CARS ARE BEING PRODUCED?

McDonald’s restaurants do the bulk of their business at lunchtime, but have found that promotionally-priced meals at breakfast and dinner make a significant profit contribution. Does the success of McDonald’s restaurants in this regard reflect an effective application of the marginal profit concept or the incremental profit concep

1.suppose the monthly income of an individual increases from Rs 20,000 to Rs 25,000 which increase his demand for clothes from 40 units to 60 units. Calculate the income elasticity of demand.
2.Quantity demanded for tea has increased from 300 to 400 units with an increase in the price of the coffee powder from Rs 25 to Rs 35. Calculate the cross elasticity of demand between tea and coffee.

1.There is a fruit seller who has 30 Kgs of apples to be sold and he wants to fix a price so that all the apples are sold. There are three customers in the market and their individual demand functions are given below:

D1=25-.05P
D2=20-.025P
D3=15-.075P
Where D is the demand and P is the price

Determine
Market demand equation for the fruit seller
Price at which he can sell all the apples
Individual demands of each of the three customers

2. A) Determine the market equilibrium price if the demand and supply function is given as:
D = 12p + 8
S = 14p – 4

Where D= demand
S=supply
p= price

B) Determine the equilibrium quantity if price is the same as above
D = 4p – 4q
S = 8q – 4p
Where D= demand S=supply p=price q=quantity

A firm produces the following units of output, Q, by hiring a fixed quantity of
capital, K, and labour, L, as follows:
L: 8, 16, 24, 32, 40, 48, 56, 64, 72, 80
Q: 16, 36, 65, 97, 137, 177, 209. 233, 249, 257
APL: 0.50, 0.44, 0.37, 0.33, 0.29, 0.27, 0.27, 0.27, 0.29, 0.31
MPL: - , 0.40, 0.28, 0.25, 0.20, 0.20, 0.25, 0.33 , 0.55 , 1.00

a. Assuming that the cost of capital is $1,000 and labour costs $10.00 per hour,
determine the total variable cost, average variable cost and the marginal cost
of the firm for the output levels given above.

b. Provide rough graphs of the TVC, AVC and MC curves and compare their
behaviour with the product curves in part b. Be sure to label your axes
correctly.

Widgets are provided by a competitive constant-cost industry where each firm has fixed costs of $30. The following chart shows the industry-wide demand curve and the marginal cost curve of a typical firm:

(Industry-Wide Demand ) - ( Firm’s Marginal Cost Curve) :

(Price - Quantity ) / (Quantity- Marginal Cost ) :
- ($5 -1500) / ( 1 - $5 ).
- (10 - 1200 ) / (2 - 10 ).
- (15 - 900 ) / ( 3 - 15 ).
- (20 - 600) / ( 4 - 20).
-(25 - 300) / (5 - 25).
-(30 - 200) / (6 - 30).
-(35 - 140)/ (7 - 35).
-(40 - 50) / ( 8 - 40).

a.What is the price of a widget?
b. How many firms are in the industry?

For the remaining four parts of this question, assume that the government imposes an excise tax of $15 per widget.
c. In the short run, what is the new price of widgets?
d. In the short run, how many firms leave the industry?
e. In the long run, what is the new price of widgets?
f. In the long run, how many firms leave the industry?