Question 1: Given the following cost function:

TC = 1500 + 15Q - 6Q

2 + 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:

Q

d = 750 - 25P

Q

s = -300 + 20 P

i. Find equilibrium price and quantity

ii. Find consumer and producer surplus

Question 4: Given production function:

Q = L 3/4 . K1/4

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 = L3/4 . K1/4

.

Question 6: Suppose that the production function of the firm is:

Q = 100L1/2.K1/2

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 - 8Q

2 + Q3

Determine the level of output at which the firm maximizes the profit.

Question 11: Determine the best level of output for the above question by the MR and MC

approach.

Question 12: Determine the best level of output for a perfectly competitive firm that sells its

product at P = $4 and faces TC = 0.04Q3

- 0.9Q2 + 10Q + 5. Will the firm produce this level of

output? Why?

Question 12: Suppose that the production function is given as follows:

TPL = 10L + 5L2 + L

3

Find the total product, Marginal product and average product when L = 5.

Question 13: Find the optimum level of output and profit from the cost function

TC = 50 + 6Q

2

and price

P = 100 - 4Q

Also derive marginal cost and marginal revenue.