Supply and Demand and Question

1042 Words Jul 8th, 2013 5 Pages
Summer-2013 - ECON 201 [section - A] Assignment # 2 Part (I) - Market Demand Question # 01: If the market demand curve is D ( p ) = 100 − 0.5 p , what is the inverse demand curve?

Question # 02: An addict 's demand function for a drug may be very inelastic, but the market demand function might be quite elastic. How can this be? Question # 03: If D ( p ) = 12 − 2 p , what price will maximize revenue?

Question # 04: Suppose that the demand curve for a good is given by D( p) = 100 maximize revenue?

p . What price will

Question # 05: If consumer 1 has the demand function D1( p ) = 1000 − 2 p and consumer 2 has the demand function D 2( p ) = 500 − p ; then what will be the aggregate demand function for an economy? Question # 06: If
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Elaborate the salient features of cob douglas production function ( Y = f ( L, K ) = b0 L 1 K b b2

).

Part (IV) - Cost Question # 01: The cost-output relation is C

= b0 + b1 X . Point out the total fix cost (TFC) and total

variable cost (TVC) from the given cost-output relation and also prove that ATC>AVC=MC. Question # 02: A firm produces identical outputs at two different plants. If the marginal cost at the first plant exceeds the marginal cost at the second plant, how can the firm reduce costs and maintain the same level of output? Question # 03: It is well known fact that area under the marginal cost curve up to a given level of output is variable cost. Explain this fact with proper justification.

Question # 04: If cost function is

c( y ) = y 2 + 1 then plot marginal cost, average variable cost and

average cost and explain their relations as well. Part (V) - Perfect Competition Question # 01: What is meant by perfect competition? Explain its assumptions. Explain the short run equilibrium of firm under perfect competition. Question # 02: Explain the first order and second order conditions of firm’s equilibrium in perfect competition. Question # 03: In long run under perfect competition the allocation of resources is optimal. Do you agree with this statement, why and why not? Question # 04: How the change in demand is going to affect the long run

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