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Unformatted text preview: Foundations of Economic and Financial Models Jrgen Meinecke EMET 1001/7001 School of Economics Semester 2, 2010 Australian National University Tutorial Questions for Week 3 (02/08/201006/08/2010) Covers lecture material from week 2 General Functions 1. The difference quotient of a function f ( x ) is defined as f ( x + h )- f ( x ) h for some positive value h . For the following functions, find the difference quotient. ( a ) f ( x ) = 4 x- 5 ( b ) g ( ) = 1 ( c ) ( z ) = z 2 ( d ) f ( x ) = x 2 + 2 x. Linear Functions 2. In the theory of the firm, economists consider the total cost C to be a function of the output level Q : C = f ( Q ) . (a) According to the definition of a function, should each cost figure be associated with a unique level of output? (b) Should each level of output determine a unique cost figure? 3. If an output level Q can be produced at a cost of C , then it must also be possible (by being less efficient) to produce Q at a cost of C +$1 , or C +$2 , and so on. Thus it would seem that output Q does not uniquely determine total cost C . If so, to write C = f ( Q ) would violate the definition of a function. How, in spite of this reasoning, would you justify the use of the function...
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