Microeconomics Answers

3. The Branline Corp. produces treated fence posts in an old plant with these production and price data:

Q = 10X + 4Y + 0.2XY

Where Q = number of treated of fence post produced per day

X = machine hours of cutting and shaping machinery used per day

Y = labor hours used per day

Px = RM250 per unit

Py = RM100 per unit

When the daily operating budget is RM1500, determine the maximum number of treated fence posts that can be produced per day. Also, specify the optimal number of labor hours and machine hours used each day.

4. Determine the returns to scale for each of the following production functions:

a. Q = 50L + 6K + 8LK

if short run elasticity in 0.3 and price falls by 30% what is change in quantity ?

Demand curves indicates maximum or minimum or average or lowest amount that the consumers are ready to pay ?
maximum / minimum / average / least ?

5.The Enviro-Guard Co. manufactures a line of heat pumps that typically are sold in the sunbelt states. Currently the company’s cost and demand relations for the heat pump line are:


TC = 15000000 + 125Q + .025Q2 (Cost)

P = 1000 - .04Q (Demand)

Where TC = total cost (RM), q = units/year, and P = price (RM).


a.Calculate the output level that minimizes average total cost.

b.Calculate price, average total cost, marginal cost, and total profit at output level calculated in part a.

c.Calculate the profit-maximizing output level.

d.Calculate the price, average total cost, marginal cost, and total profit at output level found in part c.

e.Is the price elasticity of demand greater (more elastic) at the price that minimizes ATC or at the price that maximizes profit?

3.The Branline Corp. produces treated fence posts in an old plant with these production and price data:

Q = 10X + 4Y + 0.2XY

Where Q = number of treated of fence post produced per day

X = machine hours of cutting and shaping machinery used per day

Y = labor hours used per day

Px = RM250 per unit

Py = RM100 per unit

When the daily operating budget is RM1500, determine the maximum number of treated fence posts that can be produced per day. Also, specify the optimal number of labor hours and machine hours used each day.






4.Determine the returns to scale for each of the following production functions:

a.Q = 50L + 6K + 8LK

b.Q = 8K2 + 5LK + 6K2

c.Q = 50 + 6LK

d.Q = 50 + 6L + 6K

e.Q = 5L + 2L.5K.5 + 3K

1.The Bell Corp manufactures plastic broom and mop holders, and the production function for these holders is expressed as:


Q = 50 L.8K.2


Where: Q = number of plastic holders produced per day

L = units of labor input per day

K = units of capital input per day.

Let K = 1000 and L = 100

Calculate the average product of labor and the marginal product of labor.





2.A firm has a production function:

Q= 5L.8K.25


Where : Q = number of metal stampings produced per day

L = unit of labor input per day

K = unit of capital input per day

Labor is a variable input, whereas capital is a fixed input. The selling price of Q is RM9.00 per unit; The purchase price of capital is RM 100 per unit; and the purchase price of labor is RM20 per unit.

If K is fixed at 100 units, determine the number of units of labor to purchase each day in order for the firm to maximize profit.

The short run cost function of a firm is as follows: total cost=200+5Q+2Q^2 :where Q=physical units of the product of the firm. What would be the level of optimum output ?

All firms have the same MC curve; it always costs $5 to make each jar of honey. Demand for honey is D:P= 20-0.05Q

What are the market equilibrium and quantity?

With demand function P = 120 -2Q and MC= 20.
What is the optimal quantity and price for four identical firms.