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In: Economics

A company has employed two workers A and B whose productivities are 20 units and 15...

  1. A company has employed two workers A and B whose productivities are 20 units and 15 units respectively. The wage for A is K12 whilst B’s is K8. Are these two employees optimally employed?                                                                                              [5 Marks]
  2. The average total cost of producing a tomato unit and the average variable cost are K2 and K1 respectively. Further, price is K10 and the firm operates in a competitive market.
  1. Calculate the fixed and total costs of producing 1000 units of tomatoes. [4 Marks]
  2. Calculate the profit the firm makes from selling 1000 tomatoes.              [2 Marks]
  3. What is will happen in the market as a result of your answer in (ii)?           [5 Marks]
  1. Briefly describe the condition associated with optimization of utility of an individual. [4 Marks]
  2. Show (Derive) the mathematical relationship between marginal revenue and elasticity. [5 Marks]
  3. A firm operating under a monopoly faces the following demand and cost functions: P=170 - 5Q and TC = 40 + 50Q + 5Q2.
  1. What’s the profit maximizing quantity and price?                                       [4 Marks]
  2. What is the price elasticity of demand at the profit maximizing level?      [3 Marks]
  3. Explain the strategy must the firm adopt to increase its revenue.                 [3 Marks]
  1. Graphically show the relationship that exists between total revenue and elasticity for a price decrease along the demand curve.                                                                         [5 Marks]
  2. Explain what determines who bears the most burden of a tax.                                 [5 Marks]

Solutions

Expert Solution

Rahul Sunny answered 1 week ago
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