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1. The document contains an economics assignment covering concepts related to consumer behavior and production including utility, indifference curves, budget constraints, cost concepts, production functions, and marginal analysis. 2. Questions relate to drawing and analyzing budget lines and indifference curves, utility maximization, marginal rates of substitution, explicit vs implicit and economic vs accounting costs, law of variable proportions, stages of production, and marginal product and cost curves. 3. Problems involve calculating optimal input levels, output, costs, and prices based on production functions, cost functions, utility functions, and marginal analysis.

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110 views2 pages

Assignment

1. The document contains an economics assignment covering concepts related to consumer behavior and production including utility, indifference curves, budget constraints, cost concepts, production functions, and marginal analysis. 2. Questions relate to drawing and analyzing budget lines and indifference curves, utility maximization, marginal rates of substitution, explicit vs implicit and economic vs accounting costs, law of variable proportions, stages of production, and marginal product and cost curves. 3. Problems involve calculating optimal input levels, output, costs, and prices based on production functions, cost functions, utility functions, and marginal analysis.

Uploaded by

Temesgen Lealem
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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Andnet Business and Technology College

Department of Accounting & Finance


Economics Assignment
1. Explain briefly the following concepts.
A) Utility B)Indifference curve C)Law of diminishing marginal utility
D)Budget line E)Consumer preference F)Marginal rate of substitution
2. What is the basic difference between cardinal and ordinal approaches of utility?
3. Elaborate the justifications for the negative slope and convexity of indifference curve.
4. Standard indifference curves cannot intersect each other. Why?
5. Does the change in income affect the slope of the budget line? Explain.

1. A person has $ 100 to spend on two goods X and Y whose respective prices are $3 and $5.
A. Draw the budget line.
B. What happens to the original budget line if the budget falls by 25%?
C. What happens to the original budget line if the price of X doubles?
D. What happens to the original budget line if the price of Y falls to $4?

2. A rational consumer spends all of her income on two goods: Apple and Banana.
Suppose the last dollar spent on Apple increased her total utility from 60 utils to 68 utils
and the last dollar spent on Banana increased her total utility from 25 utils to 29 utils. If
the price of a unit of Apple is 2 Birr, what is the price of a unit of Banana at equilibrium?
3. Given utility function U= where PX = 12 Birr, Birr, PY = 4 Birr and the income of the
consumer is, M= 240 Birr.
A. Find the utility maximizing combinations of X and Y.
B. Calculate marginal rate of substitution of X for Y (MRSX,Y) at equilibrium and interpret
your result.
4. Suppose a particular consumer has 8 birr to be spent on two goods, A and B. The unit price
of good A is 2 birr and the unit price of B is 1 birr. The marginal utility (MU) she gets from
consumption of the goods is given below.
Quantity
1 36 30
2 24 22
3 20 16
4 18 12
5 16 10
6 10 4

A. Based on the cardinal analysis, what is the combination of the two goods that gives
maximum utility to the consumer?
What is the total utility at the utility maximization level?

Part II: Discussion questions


1. Compare and contrast the following concepts.
a) Explicit cost and implicit cost b)Economic cost and accounting cost
2. What is the main difference between fixed inputs and variable inputs?
3. Explain the law of variable proportions.
4. Which stage of short run production is efficient? Why?
5. Show the relationship between short-run MC and MPL both mathematically
and graphically.
6. Can accounting cost be greater economic cost? Explain.
7. The short run AVC, AC and MC are all U-shaped. Why?

1. Suppose the production function is given by Q(L,K) = L 4 K 4 . Assuming capital is fixed,


find APL and MPL.

2 Consider the following short run production function:


Q=6L2 -0.4L3
A. Find the value of L that maximizes output
B. Find the value of L that maximizes marginal product
C. Find the value of L that maximizes average product

3. Given a short run cost function as TC= 1/3Q3-2Q2+60Q+100, find the minimum value of
AVC and MC.

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