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Consider two digital startups S and T. Following information about fixed and marginal cost in the short run is available: • Fixed cost FCS = 5000; constant marginal cost MCS = 40, • Fixed cost FCT = 100; marginal cost MCT = 10Q, where Q is the quantity of output produced.
a) State both startup’s total cost function !
b) What are the average cost AC(Q) of the two firms ?
c) Suppose government imposes a digital tax of 0.5 per unit of output. How does this tax affectmarginal, averageandtotalcost? Ifgovernmentchargedalump(fixed)sum,which cost would be affected ?
d) Suppose the startups are successful and stay in the market. Would you expect long run average cost to smaller or larger than average cost in the short run ? Briefly explain.
e) Can you say something about long run marginal cost, if you know that long run average cost is constant ? Does this imply anything with regard to returns to scale ? Briefly explain.
Consider an investment fund that builds its portfolios with help of humans H and robots R. The human employees receive a wage w = 40 per hour. The rental rate of robots r = 60 per hour. Suppose that inputs H and R are perfect substitutes and a portfolio can be created by 2 humans only, one robot only or any combination in between (assuming for computational reasons that humans and robots can contribute part-time also).
a) Draw isoquants for F(H,R) = {10,20,30}, i.e. production levels of 10, 20 and 30.
b) To produce 20 portfolios, the company chooses to employ 10 humans and 15 robots. Does this input combination minimise cost and, therefore, optimise production ? Add the corresponding isocost line to your graph of isoquants !
c) Whichinputcombinationwilloptimiseproduction
1. Read the article by Singham and Rangan (2018) and answer the following questions.
[50 marks]
(i) Thoroughly evaluate the article and write a short essay on the impact of such
distortions on Fiji’s economy (across sectors like Agriculture, Information, Education
etc.).
(ii) Provide examples from the local context.
(iii) Your essay must discuss the impact in relation to consumers, consumer confidence,
supply chain (upstream and downstream) and small businesses growth and
opportunities, etc.
(iv) Essay must be no longer than 2 pages.
A firm producing hockey sticks has a production function given by
q=2√kl
The price of labor is “w”, the price of capital is “v”. For any given level of output “q”:
1. Calculate the firm’s long-run total, average and marginal cost function.
2. Please show the cost function is homogeneous of degree 1 in input prices.
paul spend his income of 100$ per week on two goods : pizza ( which cost $8each ) and milk( which cost $1 per gallon) at his current level of consumption , the marginal utility from the last pizza consumed is 32 and the marginal utility from the last gallon of milk is 4. is colin maximizing his utility? why or why not? if not , what should paul do to achieve a higher level of utility ?
Given market demand Qd = 50 - P, and market supply P = Qs + 5
A) Find the market equilibrium price and quantity?
B) What would be the state of the market if market price was fixed at Birr 25 per unit?
C) Calculate and interpret price elasticity of demand at the equilibrium point
Technology advances in the Information and Communications Technology (ICT) sector over the past two decades have reduced the cost of computer chips. How do you think this has affected the market for computer hardware, computer software and typewriters?Support your answers for each market mentioned above with appropriate diagrams on the market forces of supply and demand.
Given: Marginal Utility Schedule of Jun for Beer Q MU in monetary terms 1 10 2 7 3 5 4 3 Price of beer = P5.00 a. How many bottles of beer does Jun needs to take to maximize his utility? Justify your answer. *
Marginal Utility Schedule of Jun for beer Q MU in monetary terms 1 10 3 7 3 5 4 3 Price of beer =P5.00 a. How many bottles of beer does jun needs to take to maximize his utility?
Derive supply function in a graf
