REMEDIAL CLASS - 1

Q1. Supply and demand functions for a product are:

Qs = 400P 500
Qd = 1500 100P
a) Determine the equilibrium output for the product.
b) At the current output, determine the price elasticity of demand.
c) At the current output, determine the price elasticity of supply.

Q2. The production function of Boomex, an auto spare parts manufacturer, is estimated to be Q
= 30K0.5L0.5. If the prices of capital (r) and labor (w) are Rs.20 and Rs.30 per unit respectively,
what is the minimum possible cost for producing 180 units?

Q3. For a firm, the Average Cost function is estimated as AC = 100/Q + 20 + 4Q

What is Total Variable Cost for the firm at an output of 15 units?

Q4. The long run cost function of a firm is TC = Q3 40Q2 480Q

Beyond what output do diseconomies of scale exists?

Q5. Market supply and demand equations for product XYZ are
Qs = 20,000 + 30P
Qd = 40,000 20P
A perfectly competitive firm produces product XYZ. The Total Cost function of the firm is
TC = 1000 + 200Q + Q2. Determine the profit maximizing output for the firm.

Q6. A bicycle manufacturer sells bicycles in a perfectly competitive market. The cost function is
TC = 5000 + 150Q 20Q2 + Q3. What is the price below which the manufacturers shutdown
operations?
 Solutions
Q1.
a)

b)

c)

Q2.

Q3.

Q4.
Q5.

Q6.