EP333.M2

PART II

1. A trend line for the sale of PCs, S = 300 +10t, is given based on data covering the 1998-2007 period. Using the simplified t version, forecast sale for year 2012. (S=450)

2. Construct step-by-step the isoquant and isocost. Then discuss how a producer can maximize output, given the budget constraint.

3. Discuss how changes in prices and income or budget are reflected in the slopes and the position of an isocost.

4. Suppose a producer has already attained an equilibrium point in the isoquant analysis. Explain how he can attain a greater quantity beyond the current level.

5. Derive an average product and a marginal product curve diagrammatically from a total product curve. What are the three critical points and what do they signify?

6. Explain how the production theory and the three stages of production can be turned to the theory of employment. How the cost and benefit of employment is measured and how an equilibrium quantity of employment determined?

7 Following information is given: Q = 430L - 35L², MR=15, ME=150.

a. Derive MP

b. Determine the equilibrium level of employment.

(L=6)

8. Derive AFC, AVC and MC curves diagrammatically from TC, FC and VC curves. What are the three critical points and what do they signify?

9. Starting with TR=TC, derive the break-even formula algebraically. Why the breakeven quantity is important? Could the breakeven quantity, rather than the profit maximizing quantity, be a goal of the producer?

10. Following figures are given: FC = $10,000, P = $6, AVC = $2. Calculate the break-even quantity. (Q=2,500)