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Final Practice Questions - 334103290

The document presents various economic problems involving production functions, demand and supply equations, population growth, and environmental impact. It includes calculations for optimal labor and capital combinations, elasticities of demand, and equilibrium prices, along with their interpretations. Additionally, it discusses the implications of productivity and sustainability in relation to environmental impact.

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zmansra8
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5 views2 pages

Final Practice Questions - 334103290

The document presents various economic problems involving production functions, demand and supply equations, population growth, and environmental impact. It includes calculations for optimal labor and capital combinations, elasticities of demand, and equilibrium prices, along with their interpretations. Additionally, it discusses the implications of productivity and sustainability in relation to environmental impact.

Uploaded by

zmansra8
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. Consider the Cobb-Douglas production function Q=100 L0.4 K 0.6 .

The prices of labour and


capital are 5 and 10 dollars, respectively. The firm wants to produce Q=500 units.
a. Determine the optimal combination of L and K to minimize cost, and the minimum
cost.
b. If the firm increases labour input by a small amount ∆ L=2 while keeping K constant,
approximate the resulting change in Q using differentials.
c. Interpret the economic significance of MPL and MPK for the firm.

2. Suppose the demand function for a product is given as:


Q x =500−3 P x +2 P y +0.5 I
where Q x is the quantity demanded of product x , P x is its price, P y is the price of a related good
y , and I is consumer income.
a. Calculate the income elasticity of demand when P x =10, P y =8, and I =1000.
b. Calculate the cross-price elasticity of demand for P y under the same conditions.
c. Interpret the signs and magnitudes of the elasticities for decision-making.

−kt
3. The population of a city grows according to the exponential function P ( t ) =P0 t e , where
P0=100,000 is the initial population and k =0.03 is the growth rate.
a. Find the rate of change of the population P(t ) at any time t .
b. Determine after how many years the population of the city reaches its maximum, and
the maximum population of the city.
c. Interpret the meaning of the derivative in the context of population growth.

4. A factory's productivity P(t ) and its environmental impact E(t) over time are modelled by:

P ( t ) =t ln t
1
E ( t )=
√1+t 2
where t is time in years.

a. Use integration by parts to find the total productivity ∫ P( t) dt , considering f ( x )=ln t


b. Use integration by substitution to evaluate the total environmental impact ∫ E (t) dt
c. Discuss the implications of the results for balancing productivity and environmental
sustainability.

5. The demand p D (q) and supply functions pS ( q ) for a product are given as:

p D ( q ) =120−2 q

pS ( q )=3 0+ q

where p is the price (in dollars) and q is the quantity demanded or supplied (in units).

a. Find the equilibrium price pe and quantity q e.


b. Compute the consumer's surplus and producer's surplus.
c. Interpret the results in terms of the benefits to consumers and producers.
Answers:

1. a. L=5.9 4, K=4.46 , min cost=74.35

b. −0.01

2. a. 0.507

b. 0.0162

−kt
3. a. P0 e (1−kt )
b. ≈ 34 years; ≈ 1,226,300 people

2
t
4. a. (2 ln t−1)
4
1
b. √ 1+t + c
2
2

5. a. q e =30, pe =60

b. CS=900, PS=450

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