1. Consider the following cost function:

TC=720+12q+12q⁵

where TC is total cost of production and q is quantity produced. Please identify the average fixed cost, the average variable cost and the marginal cost.

2. Consider the following cost function:

TC=4800+2q

where TC is total cost of production and q is quantity produced.

Assume the price to be $50. What is the "Break-even quantity" for the firm? What does this number mean?

3. You are indifferent (derive the same utility) between the following investments:

1. An investment with a sure return of 100 $
2. An investment with an expected outcome of 400$ and standard deviation of 80$
3. An investment with an expected outcome of 700$ and standard deviation of 160$

If you drew an indifference curve between risk and return, how would it look like? What does it say about the nature of your risk aversion?

4. Consider two parties in a trading relationship when neither party has comparative advantage. Does this mean neither have absolute advantage?Explain clearly with numerical examples.

5. When is price elasticity of demand positive? Explain with an example.

6. The effect of increasing minimum wage on the labor market (unemployment and job loss numbers) are largely dependent on the nature of the supply and demand in the labor market, as well as the nature of elasticities in the product market (of the product that the firm produces). Explain in details the conditions under which an increase in minimum wage will have minimum impact on unemployment.

7. We have seen that the price elasticities of supply and demand determine how a tax imposed on a producer impacts the market. Explain clearly when this tax causes a large deadweight loss?