Economics of Enterprise Answers

Suppose that the total utility function of a consumer is given by TU(x,y) = 3x2 y and the prices of X and Y are 1 Birr and 2 Birr per unit, respectively. If the income of the consumer is 600 Birr and if he spends all of his income on the consumption of commodities of X and Y, find the optimum amount of X and Y that the consumer will consume at equilibrium and find MRTSx,y.

Given the demand function P = 20 – 5Q, find the price elasticity of demand when price of the commodity is 5 Birr per unit. Mention if the demand is price elastic or inelastic at this point

Discuss the business factors your company would research before venturing into the global markets? Each factor should be supported by an example. 

 You decided to put away 5%

 of your annual salary for

 retirement. Your annual

 salary is $20,000 for the first

 year (at age 22) and it

 increases by 3% every year

 until your retirement (at age

 50). What will be the worth of

 your account when you retire

 if the interest is 4.5% per

 year?

The useful life of a certain type of light bulb is known to have a= 40 hours. Hoe large a sample should be taken standard deviation of it is desired to have a margin of error of 10 hours or less at a 95% level of confidence?

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.

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?

 3. You are a member of Board who chairs an ad committee of reforming taxes on telecommunication services. The local telecom tax es can amount to as much as 25 percent of a consumer’s phone bill. The high rates on telecom services have become quite controversial, due to the fact that the deregulation of the telecom industry has led to a highly competitive market. Your best estimates indicate that, based on current tax rates, the monthly market demand for telecommunication services is given by Q=250-5P and the market supply (including taxes) is Q=4P+110 (both in million). The Board of management is considering tax reform that would dramatically cut tax rates, leading to the supply function under the new tax policy of Q=4.171P+110. How much money would typical consumer save each month as a result of proposed legislation?