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    Micro Worksheet

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    Tasebe Getachew
    The document is a worksheet containing economics problems and questions for students covering topics such as consumer and producer behavior including budget constraints, utility maximization, production functions, costs and profits.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Micro Worksheet

    Uploaded by

    Tasebe Getachew
    12 views2 pages
    The document is a worksheet containing economics problems and questions for students covering topics such as consumer and producer behavior including budget constraints, utility maximization, production functions, costs and profits.

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    Micro worksheet

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    The document is a worksheet containing economics problems and questions for students covering topics such as consumer and producer behavior including budget constraints, utility maximization, production functions, costs and profits.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    12 views2 pages

    Micro Worksheet

    Uploaded by

    Tasebe Getachew
    The document is a worksheet containing economics problems and questions for students covering topics such as consumer and producer behavior including budget constraints, utility maximization, production functions, costs and profits.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    WOLAITA SODO UNIVERSITY

    COLLEGE OF BUSINESS AND ECONOMICS


    DEPARTMENT OF ECONOMICS
    Micro Economics I Work sheet for Weekend IV Economics student

    1. Suppose a consumer has income of birr 20 which is to be spent on good A and


    B
    .Good a cost birr 2 and good b cost birr 4

    A. Determine equation of the budget line


    B. Draw budget line
    C. Calculate the slope of budget line and interpret
    D. Can consumer be on budget line buying 5 unit of good a and 2 unit of good b?
    Why?
    2
    2. Suppose the utility function for a good to a consumer is given as U=20Q-2Q .
    How much quantity of the good the consumer should the consumer purchase to
    maximize total utility. What will happen if the consumer obtains more quantity than
    the one you computed?
    3. A consumer has $280 to spend on two commodities, the first of which costs $2 per
    unit and the second $5 per unit. Suppose that the utility derived by the consumer from
    x units of the first commodity and y units of the second commodity is given by the
    0.25 0.75
    Cobb-Douglas utility functions as: U ( x, y)  100x y

    a. How many units of each commodity should the consumer buy to maximize
    utility?
    b. Compute the Lagrange multiplier  and interpret in economic terms?(Hint: In the
    context of maximizing utility  is the marginal utility of money)
    4. Find the MUx , MUy , and MRS equations for each of the following utility functions.
    Which of the below utility functions exhibit diminishing MRS? (That is, which of the
    below yield convex indifference curves?).
    0.6 0.4
    a. U = x y .
    2 2
    b. U = x + y
    x,y>0. c. U = 2x + 4y.
    d. U =
    2 2
    x y . e. U
    a b
    =x y
    α β
    5. . In the Q=AL K , Cobb Douglas production function, initially the producer uses L
    and K amounts of Labor and Capital, respectively. Suppose now both inputs are
    doubled. Under what condition the production function show increasing,
    decreasing, and constant returns to scale.

    Page 1
    WOLAITA SODO UNIVERSITY
    COLLEGE OF BUSINESS AND ECONOMICS
    DEPARTMENT OF ECONOMICS
    Micro Economics I Work sheet for Weekend IV Economics student

    6. Given the utility function U  150X  40 X 2  X 3 , derive average and


    marginal utility functions, Find the value of X at which total utility is maximum, and
    the value of X at which average utility is maximinum?
    7. Imagine a perfectly competitive firm producing good A with cost function

    2 3
    TC=400+20Q-2Q +2/3Q , where Q is quantity produced a.determine the

    firm’s short run supply curve


    b. What is the profit maximizing level of output when price of A is birr 180?

    ½ ½
    8. Suppose you have the following production function: Q = f (L, K) = 10L K
    . In addition, the price of labor is $1 and the price of capital is $4

    a. What is the optimal amount of labor and capital if you want to produce 20 units?
    b. What is the level of minimum cost ?( Ans L=4 and K=1,Min C=$8)

    9. Suppose the short run production function can be represented by

    2 3
    Q = 60,000L – 1000L . Then, determine
    a. The level labor employment that maximizes the level of output
    b. The level of employment that maximizes APL and the maximum APL.

    10. Suppose Q gives the production function Q=150KL and the price of labor and capital
    is 2.5 and 6 birr respectively. If the total outlays of the firm is 3000 Birr. Determine
    the level of employment of both inputs that maximizes output.( Hint: Use Lagrangean
    method ).
    11. Suppose that the Q= 10L0.6 K 0.4 . Then, find the following.
    a) Marginal product of labour
    b) Marginal product of capital
    c) Slope of the isoquant and interpret.
    d) Degree of homogeneity of the function
    e) Indicate the option under which it increasing, decreasing and constant
    returns to scale
    f) Suppose wage rate = 1 dollar per hour, interest on capital = 3 dollar.
    Then, find equation of the expansion path

    Page 2

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