1.Define and state the characteristics and properties of the Cobb-Douglas Production Function.

2.If we were told that the estimated production function for a particular brand of gin is

Q = 19.4K0.2370 L0.0682

Where Q = millions of bottles of gin

K= units of capital (000)

L= labour hours (000)

Assuming the cost of labour (L) is $100 per hour and the cost of capital (K) is $200 per unit, in what ratio must K and L be used in order to produce this gin at the lowest possible cost?

3.Given the total cost function for a St Lucian Construction Firm is :

TC = 2070 + 20Q - 0.8Q² + 0.05 Q³

Where Q is output in thousands

a.Find the level of output which results in minimum average variable cost.

b.What is the average variable cost at this level of output?

4.Assuming an output levels of 10,000 and 15,000 and using the following cost function:

TC = 1650 + 16Q - 0.6Q² + 0.06Q³

Where Q is output in thousands

Calculate the following:

a.The marginal cost of production.

b.The average total cost of production.

c.The average fixed cost of production.

d.The average variable cost of production.

5.Define the following types of costs:

a.Incremental cost

b.Marginal cost

c.Historical cost

d.Replacement cost

e.Fixed cost

f.Variable cost

g.Opportunity cost

6.Point out which of the costs in the preceding question are considered relevant and which are considered irrelevant