Solution to Practice Problems
Chapter 3
1.3
The elasticity of demand is the percentage change in quantity divided by the percentage
change in price:
=
Q p
Q
p
=
.
Q p
p Q
From the demand equation,
Week 6 Discussion  Pricing and Output Decisions  Perfect Competition and Monopoly
Please answer the following three questions:
1. What are the main characteristics of a perfectly competitive market
Week 8 Discussion  The Multinational Corporation and Globalization
1. Opponents of globalization argue that offshoring leads to a loss of jobs in the country
that transfers jobs to lowerwage countri
Week 4 Discussion  The Theory and Estimation of Production
1. Discuss the problems of measuring productivity in actual work situations. How might productivity
be measured for each of the following in
Week 7 Discussion  Pricing and Output Decisions  Monopolistic Competition and Oligopoly
1.
In
certain
industries, firms buy their most important inputs in markets that are close to perfectly
competi
Week 5 Discussion  The Theory and Estimation of Cost
1. Define and compare the following types of cost:
Sunk cost versus incremental cost

Sunk costs are costs which occur in the past. It is conside
Solution to Practice Problems
Production
2.3
The production function is
q L0.75 K 0.25 .
a. As a result, the average product of labor, holding capital fixed at
APL q / L L 0.25 K 0.25 K / L
0.25
K,
i
1.
(a) This production always displays constant returns to scale.
(b) This production function has decreasing, constant, or increasing returns to scale as
2.
is less than, equal to, or greater than 1.
1. Essentially, what do you think are the changing aspects of the economics (i.e., customers,
technology, and competition) of the following industries?
Telecommunications  Technology has been a major
1. Discuss the relative price elasticity of the following products:
Mayonnaise: This product is inelastic, if the price goes up there is still a
good chance that consumers will continue to purchase b
Solution to Practice Problems
Chapter 6
Cost
2.3
a. AFC = 10/q.MC = 10. AVC = 10.AC = 10/q 10.
b. AFC = 10/q. MC = 2q. AVC = q. AC = 10/q q. See the figure below.
c. AFC = 10/q. MC = 10 8q 3q2q2. AVC
Solution to Practice Problems
Chapter 5
Production
2.3
The production function is
q L0.75 K 0.25 .
a. As a result, the average product of labor, holding capital fixed at
APL q / L L 0.25 K 0.25 K / L
ROMEORYAN B. ARBIOL
October 2, 2015
Week 06 Individual Assignment
Chapter 8 Pricing and Output Decisions: Perfect Competition and Monopoly
Problems
1. It is absolutely a good idea for the firm to be i