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Production Tutorial Questions

The document contains tutorial questions on production and cost theory in microeconomics, covering topics such as production functions, cost curves, and the relationship between labor and output. It includes practical problems for calculating marginal and average products, as well as theoretical explanations of concepts like isocost and isoquant. Additionally, it features a case study involving a frozen yogurt shop to illustrate production functions and marginal product analysis.

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maximilianjoseph29
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7 views3 pages

Production Tutorial Questions

The document contains tutorial questions on production and cost theory in microeconomics, covering topics such as production functions, cost curves, and the relationship between labor and output. It includes practical problems for calculating marginal and average products, as well as theoretical explanations of concepts like isocost and isoquant. Additionally, it features a case study involving a frozen yogurt shop to illustrate production functions and marginal product analysis.

Uploaded by

maximilianjoseph29
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

INSTITUTE OF ACCOUNTANCY ARUSHA

INTRODUCTION TO MICROECONOMICS
BET1, BEF1, BFB1
TUTORIAL QUESTIONS
TOPIC: PRODUCTION AND COST THEORY

1. What is production function? Explain factors of production


2. With the aid of diagrams, explain the relationship between MC, AVC and ATC
Curves. What is the law of variable proportions?
3. How is the production in the long-run differs from the production in the short-
run?
4. What are the difference between isocost and isoquant?
5. Explain the concept of marginal rate of technical substitution
6. What is a production function? How does a long run production function differ
from a short-run production function?
7. TC = 2500 + 340Q – 5Q2 + 2Q3
Find the level of output at which AVC = MC
8. Short run production function is given by Q= 90L2 – L3
Find the level of labor where AP is maximized.
9. If the total cost function of producing a commodity is given as

TC = 4q2 +2q

Where by TC = total cost, q = output

Find – Marginal Cost

[Link] the following short run production function:

Q= 6L2 – 4L3
a) Find the value of L that maximizes output.

b) Find the value of L that maximizes marginal product.

c) Find the value of L that maximizes average product

11. Consider the following output table

Labor Output Marginal Average


product product
1 2
2 6
3 16
4 29
5 43
6 55
7 58
8 60
9 59
10 56

a) Calculate marginal product and average product

b) What is the point that the firm maximizes profit?

c) Within what ranges do we see increasing returns, decreasing returns and


negative returns?
12. Marty’s Frozen Yogurt is a small shop that sells cups of frozen yogurt in a
university town. Marty owns three frozen-yogurt machines. His other inputs are
refrigerators, frozen-yogurt mix, cups, sprinkle toppings, and, of course,
workers. He estimates that his daily production function when he varies the
number of workers employed (and at the same time, of course, yogurt mix,
cups, and so on) is as shown in the accompanying table.

Quantity of Quantity of
labor frozen yogurt
1 2
2 6
3 16
4 29
5 43
6 55
7 58
8 60
9 59
10 56

a. Draw the total product curve. Put the quantity of labor on the horizontal axis and
the quantity of frozen yogurt on the vertical axis.

b. What is the marginal product of the first worker? The second worker? The third
worker? Why does marginal product decline as the number of workers increases?

13. Explain the shape of long run average total cost curve ( LRATC Curve)

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