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ECN 201 - Assignment - Summer 2022

1. The document provides an economics assignment with 3 questions. Question 1 asks about deriving a budget line equation based on an individual's income and prices of goods, drawing an indifference curve to show optimal consumption, and showing if a consumption bundle is affordable given the budget line. 2. Question 2 asks about completing a table with information about a pottery firm's production including output, labor, and costs at different input levels, and calculating total labor cost and profit-maximizing output given market price and total cost. 3. Question 3 asks about a flower shop's short-run shutdown decision and long-run exit decision given its revenues, total costs including fixed costs, and current output level.

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Shabbir Ahmed
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43 views1 page

ECN 201 - Assignment - Summer 2022

1. The document provides an economics assignment with 3 questions. Question 1 asks about deriving a budget line equation based on an individual's income and prices of goods, drawing an indifference curve to show optimal consumption, and showing if a consumption bundle is affordable given the budget line. 2. Question 2 asks about completing a table with information about a pottery firm's production including output, labor, and costs at different input levels, and calculating total labor cost and profit-maximizing output given market price and total cost. 3. Question 3 asks about a flower shop's short-run shutdown decision and long-run exit decision given its revenues, total costs including fixed costs, and current output level.

Uploaded by

Shabbir Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Independent University, Bangladesh

ECN-201: Principles of Microeconomics


Summer 2022
Assignment
(Total Marks – 20)

1. Arya has an income of $150 per month. She spends on two goods: Burgers and Colas. The price of
a burger is $5 and the price of a cola is $2. (8)
a. Using the information above, derive Arya’s budget line equation with the quantity of cola
on the left side.
b. Arya’s utility is maximized when 18 burgers and 30 colas are consumed. Draw an
indifference curve along with your budget line (with quantity of burgers on the x-axis) to
show Arya’s best affordable point.
c. Are 10 burgers and 20 colas affordable? Show it on the graph you drew in part (b).
d. Suppose, income falls from $150 to $100. Show how your graph in part (b) will change?
e. Suppose, price of burger rises from $5 to $10. Show how your graph in part (b) will
change?

2. The following table provides information about Pottery Inc. The wage rate per worker per hour is
$10 and the cost of machine per hour is $20 per hour. Using the given information complete the
table. (8)

Output
Number Number (Pots Marginal Cost of Cost of Total
of of produced Product of Workers Machines Cost
Workers Machines per hour) Labor
1 2 20
2 2 40
3 2 55
4 2 65
5 2 70
6 2 72
a. If Pottery Inc. produces at a rate of 70 pots per hour and operates 8 hours per day, what is
Pottery Inc.’s total labor cost per day?
b. Suppose Pottery Inc. operates in a perfectly competitive market. If the price of a pot is $2,
find out the profit maximizing output and economic profit.

3. Rifah’s flower shop is a profit-maximizing, competitive firm. Rifah sells flower baskets for $24
each. Her total cost each day is $280, of which $30 is a fixed cost. She sells 10 flower baskets a
day. What should be Rifah’s short-run decision concerning shutdown and her long-run decision
concerning exit and why? (4)

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