Assignment Task
Part one: Workout (Attempt all questions with all the necessary steps)
1. Assume an individual has 20 birrs to spend on two products X1 and X2 each with a market price of 2(two) If the total utility the consumer generates from the two products is as given on the table below,
2. Select all combinations of X1 and X2 that fulfil the necessary conditions of consumer equilibrium, and from them identify the consumer’s equilibrium purchase size.
Q
1
2
3
4
5
6
7
8
9
10
11
TUX1
16
30
41
51
60
68
75
81
86
89
90
TUX2
15
28
40
48
54
59
63
66
68
69
69
3. Assume Mr. Abebe spends all his daily income of birr 100 on food, and he purchases bread and coffee. The price of a loaf of bread is birr 5, and the price of a cup of coffee is birr 10. If Mr Abebe purchases 5 cups of coffee and 10 loaf of bread, and make his marginal rate of substitution between coffee and bread to be one. Is Mr Abebe at his equilibrium point? If yes, explain how? If no, explain how he can manage to reach his equilibrium point?
4. Assume the short-run production function of a firm is given by If L is variable input and K is fixed?
5. How many labour forces should the company hire to produce its maximum possible output size? And show if average productivity of the labour force is increasing or decreasing at this point.
6. How many labour forces should the company hire to make the average productivity of the variable input maximum? And show if the marginal productivity of the labour force is increasing or decreasing at this point.
7. Assume a firm operating under a short-run production period with a total cost function given?
8. What must be the output size to minimize the average cost of production, and show if the marginal cost of production is increasing or decreasing at this point?
9. Assume a firm operating under perfectly competitive market structure has a total cost function of If the market price of the product?
10. Calculate the profit-maximizing level of output.
11. Calculate the profit level of the firm.
12. What must be the market price level for the firm to make a zero profit?
