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Using Indifference curve analysis, show how price effect of a commodity is decomposed into
income effect and substitution effect.
How does a competitive firm determine its profit-maximizing level of output? Explain
The Output and the total cost data for a firm are given below. Work out the following costs.
Total Fixed cost, Total Variable cost, Average Fixed cost, Average Variable cost, Average Total cost
and Marginal cost at various levels output.
Units of output 0 1 2 3 4 5 6
Total cost (Rs.) 60 90 100 105 115 135 180
How does a competitive firm determine its profit-maximizing level of output? Explain
Suppose that when Keith’s income increases from RM28,000 to RM30,000 per year, his
purchases of good A increase from 4 units to 5 units.
i. Calculate the coefficient of income elasticity of demand.
ii. Interpret the value of the coefficient above.
Suppose that when Mary’s income increases from RM56,000 to RM60,000 per year, her
purchase of good B decreased from 10 units to 5 units.
i. Calculate the coefficient of income elasticity of demand.
ii. Interpret the value of the coefficient above.
Use the production possibility frontier (PPF) to illustrate and explain the scarcity, choice and opportunity cost of a farmer who is producing maize and sorghum.
Ernie owns a water pump. Because pumping large amounts of water is harder than pumping small amounts, the cost of producing a bottle of water rises as he pumps more. Here is the cost he incurs to produce each bottle of water:
Cost of first bottle $1
Cost of second bottle 3
Cost of third bottle 5
Cost of fourth bottle 7
a. From this information, derive Ernie’s supply schedule. Graph his supply curve for bottled water.
b. If the price of a bottle of water is $4, how many bottles does Ernie produce and sell? How much producer surplus does Ernie get from these sales? Show Ernie’s producer surplus in your graph.
c. If the price rises to $6, how does quantity supplied change? How does Ernie’s producer surplus change? Show these changes in your graph.
Assuming the about run cost function of a firm is given by:TC=4Q3+3Q2+10Q+30.
a)find the expression of TFC and TVC.
b) derive the expression of AFC,AVC,AC and MC.
c) find the levels of output that minimize MC and AVC.
d) find the minimum values of MC and AVC
Consider a firm who involved in investment of coffee production short run with a function given by:Q=10KL-4L2-2K2 where Q is quantity of coffee production, L is labor input and K is fixed capital input (K=8).
a) determine the average product of labor APL function
b) at what level of labor does the total output of coffee yield reach the maximum?
c) what will be the maximum achievable amount of cut-flower production?
