TUTORIAL QUESTIONS
1. (a). Given that C = 0.08𝑞 3 – 1.8𝑞 2 + 12𝑞 + 10
(i). Find the level of output that minimize cost.
(ii). Ensure the second-order condition is satisfied.
(b). Given that U= 𝑞16 𝑞24
Subject to 100 = 3𝑞1+ 4𝑞2
(i). Find the units of 𝑞1 and 𝑞2 that maximize utility.
(ii). Ensure the second-order condition is satisfied.
2. Find the optimum commodity purchased for consumer whose utility function and budget
constraint are U=q1q2
subj. 200=6q1+8q2
Ensure the satisfaction of the second order condition
(b) Sketch the budget line that satisfy the equation of the income constraint
(c) Assume that the price of commodity q1 drops to N4. Determine what happens to the
budget line
3. (ai) Suppose that the demand equation facing a perfect competition is given as P=60-11x
and
the total cost function is given in cubic form as follows C=2x3-20x2+6x+2 . Find the
profit
maximizing level of output
(aii)Show that the perfect competitor is making profit at the optimum
(b) Calculate the following
(i)Price (v) Total revenue
(ii)Total cost (vi) Marginal cost
(iii)Average revenue (vii) Average cost
(iv)Fixed cost
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4. Prove that the first order condition for output maximization
If Q= f(K, L)
(b) Prove that elasticity of output with respect to input is given by MP/AP
5. The demand for commodity q1 is given by the equation
Q1=4.0Y-6.0P1+2.0P2 ;
where P1=N5 ; Y=N12 ; P2=N3
a. Calculate the following
(i) Own price elasticity (ii) Cross elasticity (iii) Income elasticity
b. From the above
(i) Determine whether commodity q1 is a luxury or a necessity
(ii) Is commodity q2 a substitute or a complement?
6. a. Given the demand and supply equations as follows :
QD = 220 - 10P
QS = -20 + 2P
You are required to
i. determine price at equilibrium
ii. determine quantity at equilibrium
iii. demonstrate your equilibrium price and quantity on a graph
b. With the aid of diagram differentiate between change in demand and change in
quantity demanded
c. Highlight the factors that are responsible for change in demand
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7. From the table below calculate the missing figures (A-J). Ensure you show your workings
clearly
unit TFC TVC TC MC
0 400 0 400 -
1 400 200 C F
2 400 A 700 G
3 400 400 D H
4 400 B 900 I
5 400 620 E J
b. with the aid of diagram, explain the short run costs family.
8. a. Given that Qx = 20 – 0.2Px + 0.5Py + 0.8Y2
Where Px = 4, Py = 8, Y = 100
i. calculate the own price elasticity of demand
ii. calculate the cross price elasticity of demand
[Link] the income elasticity of demand
b. Interpret your results in 8a.
9. a. Explain the law of Diminishing Marginal Utility
b. What are the assumptions of cardinal utility theory?
c. What are the properties of indifference curve?
10. Given the demand and supply equations as follows :
QD = 100 - 5P
QS = -10 + 6P
You are required to
iv. determine price at equilibrium
v. determine quantity at equilibrium
vi. demonstrate your equilibrium price and quantity on a graph
b. With the aid of diagram differentiate between change in demand and change in
quantity demanded
c. Highlight the factors that are responsible for change in demand
3
11 a. Explain the law of Diminishing Marginal Utility
b. What are the assumptions of cardinal utility theory?
c. What are the properties of indifference curve?
12. From the cost schedule in the table below, calculate the average variable cost (AVC),
average total cost (ATC) and marginal cost (MC) of the firm. Show your working clearly.
Output TFC TVC TC AVC ATC MC
(Q)
1 100 0 100 0 100 -
2 100 40 140 A F K
3 100 64 164 B G L
4 100 80 180 C H M
5 100 88 188 D I N
6 100 96 196 E J O
13 Given that Qx = 20 – 0.2Px + 0.5Py + 0.8Y2
Where Px = 4, Py = 8, Y = 50
a. calculate the own price elasticity of demand
b. calculate the cross price elasticity of demand
c. calculate the income elasticity of demand
d. Interpret your results in 13a.