Answered: Question 1: Given the following cost…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 1: Given the following cost function:
TC = 1500 + 15Q – 6Q² + Q³
i. Determine the total fixed cost for producing 1000 units of output and 500 units of output.
ii. What is AFC at:
a) 1000 units of output
b) 500 units of output
iii. Determine TVC, AVC, MC and AC at 50 units of output.

Question 2: The demand function equation faced by PTCL for its computers is given by:
P = 50,000 – 4Q
i. Write the marginal revenue equation
ii. At what price and quantity marginal revenue will be zero?
iii. At what price and quantity will total revenue be maximized?

Question 3: Suppose the following demand and supply function:
Qd = 750 – 25P
Qs = -300 + 20 P
i. Find equilibrium price and quantity
ii. Find consumer and producer surplus

Question 4: Given production function:
Q = L ^3/4 . K^1/4
Find out the optimal quantities of the two factors using Lagrangian method, if it is given that price of labor is Rs.6 and price of capital is Rs.3 and total cost is equal to Rs.120.

Question 5: Given the cost function is
TC = 6L + 3K
Find out the optimal quantities of the two factor using Lagrangian method, if it is given that
output is equal to 13.46 = L^3/4 . K^1/4

Question 6: Suppose that the production function of the firm is:
Q = 100L^1/2.K^1/2
K= 100, P = $1, w = $30 and r = $40. Determine the quantity of labor that the firm should hire in order to maximize the profits. What is the maximum profit of this firm?

Question7: Solve the above problem for w = $50.

Question 8: Given TC = 100 + 60Q – 12Q² + Q³
Find
a. The equations of the TVC, AVC, and MC functions.
b. The level of output at which AVC and MC are minimum, and prove that the AVC and
MC curves are U-shaped.
c. Find the AVC and MC for the level of output at which the AVC curve is minimum.

Question 9: Answer the same questions as in the above problem if:
TC = 120 + 50Q – 10Q2 + Q3

Question10: If the demand function faced by a firm is:
Q = 90 – 2P
TC = 2 + 57Q – 8Q² + Q³
Determine the level of output at which the firm maximizes the profit.

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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