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The prices of inputs K and L are given as $12 per unit and $3 per unit respectively, and a firm operates with the production function
Q=25 K ^0.5 L^0.5
Q=25K0.5L0.5
.
(i) What is the minimum cost of producing 1,250 units of output?
Whether merit or demerit goods are best provided in a market economy
As a firm believer in the idea of sustainability, you were able to discover a cheap and efficient technology of recycling plastic bottles and single use bags into various products. To make this technology a profitable business opportunity, your firm collaborates with Adhuna Ltd. which is in the production of plastic helmets for construction purposes and plastic durables for households. Given this product range, your firm has the following two production opportunities:
● In the first case your estimated annual revenue is Rs. 2,50,000, and the production will cost you Rs. 80,000.
● In your second option, you expect to sell 2000 helmets every year at Rs. 100 each, and the average total cost of every helmet will be Rs.20.
a. Which production opportunity will you choose and why?
b. If you do so, what will be your economic profit?
In line with the overall development of the health infrastructure, the state governments across the country provides a grant of Rs.6,00,000 each year to various laboratories across various organisations to conduct cancer research, where the costs of operating the research lab is Rs.3,00,000. Prima Donna, which is a leading alcohol beverage manufacturing company, offers funding of Rs. 8,00,000 each year to do beer research, but researching on beer would increase costs by Rs. 50,000.
1. What is the opportunity cost of conducting cancer research? Break this into implicit and explicit costs.
2. What option will the department choose? What are the opportunity costs of this choice?
The schedule below shows the quantities of shoes demanded at each income level in a community from 2020 to 2021:
Year
Income (R)
2020
5 000
1 000
Quantity (units) 2021
6 500
900
- Calculate the income elasticity of demand, using the arc method and interpret your result
- List any four factors that could result in the shoes having inelastic price elasticity of demand
- Explain the importance of understanding the relationship between price elasticity of demand and total revenue.
Assume that workers in the orange farming industry start demanding higher salaries and wages. Illustrate and explain how this would impact the equilibrium price and quantity of oranges
Explain any two advantages and two disadvantages of the economic system used in your chosen country. (5)
The total earnings of a worker are represented by E = 100 + $10(24−L), where E is earnings and L is the number of hours of leisure. How many hours of leisure are consumed if this worker's total earnings are $160? Show solutions.
The total earnings of a worker are represented by E = 100 + $10(24−L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 14 hours of leisure per day? Show solutions.
A consumer must divide P6,000 between the consumption of product X and Y. The relevant market prices are Px= P100 and Py= P400.
a. Write the equation for the consumer's budget line.
b. Illustrate the consumer's opportunity set in a carefully labeled diagram.
c. Show how the consumer's opportunity set changes when the price of good X increases to P200. How does this change alter the market rate of substitution between goods X and Y?
