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The document outlines an assignment for a Microeconomics course, detailing tasks related to production functions, cost concepts, economies of scale and scope, and perfectly competitive markets. Students are required to draw various graphs and explain economic concepts, with specific instructions on grading penalties for late submissions. The assignment emphasizes the importance of clarity in presentation and adherence to English language requirements.

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6 views

Assign2

The document outlines an assignment for a Microeconomics course, detailing tasks related to production functions, cost concepts, economies of scale and scope, and perfectly competitive markets. Students are required to draw various graphs and explain economic concepts, with specific instructions on grading penalties for late submissions. The assignment emphasizes the importance of clarity in presentation and adherence to English language requirements.

Uploaded by

95g5n77d84
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BTM210 Microeconomics Youngsun Kwon

November 11, 2024

Due Date: By midnight on November 29, 2024


 You lose 10% of your grade every 24 hours from the due time.
 You don’t have to type and print your answer. Just readable handwriting is
acceptable. Use only English. If you don’t, you get zero points.

Assignment #2

1. The production function is Q=f (L , K) , where Q is the quantity produced, L is


labor, K is capital, and f is a concave function. When drawing graphs, mark all the
labels of axes and the variables. (20 points)
a. Draw a production function when K is fixed.
b. Draw APL and MPL curves from the short-run production function that you
draw at a.
c. Explain the concept of isoquant and draw an isoquant on a graph.
d. Find MRTS, the slope of an isoquant.

2. Understanding cost concepts: Assume L is variable input, and K is fixed. (20 points)
a. Derive the relationship between AVC and APL.
b. Derive the relationship between MC and MPL.
c. Draw a graph showing the shape and relationship of MC and AVC curves.
d. Draw AVC, AFC, MC, and ATC curves based on the following cost functions.
Do not photocopy the textbook.

3. Draw TC, VC, FC, ATC, MC, AVC, and AFC for the cost function TC = aQ + FC,
where a is constant. (10 points)
4. Economies of scope and economies of scale. (15 points)

1
BTM210 Microeconomics Youngsun Kwon
November 11, 2024

a. Explain the concept of economies of scale and the method of measuring


economies of scale.
b. Explain in words that increasing returns to scale results in economies of scale
without using any math.
c. Explain the concept of economies of scope and the method of measuring
economies of scope.

5. Understanding a perfectly competitive market. (25 points)


a. Draw a graph illustrating a firm making an economic loss in the short run in a
perfectly competitive market. Show the size of economic loss on the graph.
b. Mark the shutdown point on the above graph at a, and explain why shutting
down is better than producing (10 points)
c. Draw a graph illustrating a firm making a positive profit in the short run in a
perfectly competitive market. Show the size of the profit on the graph.
d. Explain why all firms in the perfectly competitive market earn zero profit when
they have the same cost function.

6. Explain the concept of economic rent and its relationship with economic profit. Give
an example of a person earning economic rent. (10 points).

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