Economics of Enterprise Answers

You are the manager pf a firm that produces and markets a generic type of soft drink in a competitive market. In addition to the large number of generic products in your market, you also compete against major branch such as Coca-Cola and Pepsi. Suppose that , due to successful lobbying efforts of sugar producers in the Sri Lanka, Ministry of Finance is going to levy a Rs. 100 per Kg tariff on all imported raw sugar – the primary input for your product. In addition, Coke and Pepsi plan to launch an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will these events impact the equilibrium price and quantity of generic soft drinks?.

Suppose that a firm produces at an output level where the MPL is 50 units and the wage rate is Rs.25 (W).Suppose further that the MPK is 100 units and the rental price of land is Rs.40.

Q 1= is the firm producing efficiently?

Q 2 = If the firm is n producing?

Efficiently, how might it do so?

What is the MPL and MPK based on the input rates specified?

If the rental price of the land was Rs.20 for unit what was the wage rate?

Suppose that the rental price of capital is expected to increase to Rs.25 while the wage rate and the labour input will remain unchanged under the terms of labour contract. If the firm maintains efficient production, what input rate of land will be used?

A bond issued by the national government pays 1000 Php at the end of each year for 6 years, plus an additional 10,000 Php when the bond matures at the end of 6 years. What is the maximum payment for this bond if the existing opportunity cost of funds is 10%?

Use the graph to explain whether an efficient level of emissions can be attained in two different regions for example an urban and a rural area.

production period output capital labour

1 225 10 20

2 240 12 22

3 278 10 26

4 212 14 18

5 199 12 16

6 297 16 24

7 242 16 20

8 155 10 14

9 215 8 20

10 160 8 14

estimating cd function

estmate the parameters of a cobb-douglas production function using the least squares regression method

Q=180√LK^0.8

L=5

K=10

1).Construct marginal product of labour and marginal product of capital

2If L=5, K=10 Measure average product of labour and average product of capital

3.return to scale production function

4.if K=5, L=10 calculate marginal rate of products.

5.law of diminishing marginal returns of labour and law of diminishing marginal returns of capital

6.how about the cross partial effect of this production function

Suppose the expected real interest rate in South Africa is 3 percent per year while that of United States is 1 percent per year. What do you expect to happen to the real ZAR/USD exchange rate over the next year?

Suppose the cost function is given as C = 135 + 75Q – 15Q2 + Q3. Prepare a cost schedule (table) showing the TFC, TVC, TC, AFC, AVC, MC, and ATC. Is this cost function a short run or a long run cost function? Why? Draw the cost curves on the basis of cost data obtained from the cost function

Suppose the short run market price a competitive firm faces is Birr 9 and the total cost of the firm is: TC = 200 + Q + 0.02Q 2 . Answer the questions that follow.

(A) Calculate the short run equilibrium output and profit of the firm.

(B) Derive the MC, ATC, and AVC and calculate the values at the short run equilibrium output.

(C) Calculate the producers’ surplus at the equilibrium output.

(D) Find the output level that will make the profit of the firm zero.