ARE100AFA11HW4KEY - 1 Managerial Economics(ARE 100A...

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1 Managerial Economics (ARE) 100A University of California, Davis Spring Quarter, 2011 Instructor: John H. Constantine Homework 4: Due Friday October 21, 2011 Problem 1 : You are given the demand curve for product X: Q X = P X -2.1 P Y 0.5 I 1.8 . Q X is the consumption of X, P X is the price of X, P Y is the price of an alternative good Y, and I is income. Calculate the own-price demand elasticity. Problem 2 : Suppose the demand equation for an item is P = 1,000 + 3Q – 2Q 2 . (a) Determine the own-price elasticity of demand at Q = 11 units. (b) At what Price/Quantity combination is TR maximized? (c) At the Price/Quantity combination of part (b), what is the own-price demand elasticity? Problem 3 : Consider the following table characterizing the short-run production function for hamburger production. K is the number of grills the firm uses and L is the number of labor hours the hires. (a) Fill in the table. (b) Draw the table’s information on two graphs: The top graph containing the total product curve and the bottom containing the average and marginal product curves. (c) At what input-output combinations do the following occur? (i) MP L reaches its maximum (ii) AP L reaches its maximum (iii) MP L = AP L (iv) Q reaches its maximum (v) AP K reaches its maximum. (d) Clearly label on your graph of part (b) the three stages of production.
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2 Problem 4 : Suppose you know a firm’s short-run production to be: Q = 70L + 12L 2 – 0.5L 3 , where L is variable input and Q is output. You are to answer this question using calculus .
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ARE100AFA11HW4KEY - 1 Managerial Economics(ARE 100A...

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