3. Suppose a cost function is given as C = 135 + 75Q - 15Q2 + Q3 . There are a cost schedule showing total cost, marginal cost, marginal cost, average cost and average variable cost. Draw the cost curves on the basis of cost data obtained from the cost function. 4. (a) What is production? (b) In each of the following activities, identify what is being produced and the major inputs: (1) Baking a cake (2) Attending college (3) Eating (4) Sleeping

1. (a) What is demand? How does it differ from need, want and desire? (b) Distinguish between demand and quantity demanded. 2. State the law of demand and show it through a demand schedule and a demand curve. what are the exceptions to the law of demand? 3. Explain demand schedule, demand curve and demand function. Derive curve from the demand function Q=50-10 P. 4. (a) What is implied by the downward sloping characteristic of a demand curve? (b) Is a downward demand curve consistent with the utility-maximizing rule? Explain. 5. (a) Define an increase in demand- A decrease in demand. (b) Illustrate each on a diagram. 6. (a) What factors are held constant when drawing a given demand curve? (b) What happens when one or more of these factors change? (c) How does increase in income, other factors remaining the same, affect the demand for necessities, comforts and luxuries? 7. (a) What is market demand? (b) What are the determinants of market demand? 8. State whether the following changes increase or decrease the current demand for new American-made cars, and explain why. Also illustrate each on a diagram. (a) An increase in the price of Japanese cars. (b) A decrease in money incomes. (c) Consumers expect lower U.S car prices in the future.

2. (a) Explain the concepts of arc and point elasticity of a demand curve for a commodity. (b) What is the problem in using the arc elasticity? How can this problem be resolved? (c) How is the point elasticity on curvilinear demand curve measured? 3. Explain the concept of price elasticity of demand and the relationship between price elasticity, average revenue and marginal revenue. 4. (i) What are the determinants of price elasticity of demand? (ii) Prove that in the case of two straight line demand curves, with the same point of origin on the price axis, at any given point, elasticity is the same in spite of their different slopes. 5. (a) What does price elasticity of demand measure? (b) If two straight line demand curves intersect each other, which of them will have higher elasticity of demand at point of intersection? (c) Explain cross elasticity of demand and income elasticity of demand.

2. Suppose you are in the market for a new bicycle. A salesperson shows you a new 10-speed model for $249. You say the bicycle is nice but you cannot afford such an expensive model. What do you really mean when you say you cannot afford this item? Surely you could fine $249 in either your savings or a small loan? 3. "The more the marrier" contradicts the law of diminishing marginal utility. True or false? Explain. 4. The marginal utiltity of a steak and a fish dinner for an individual is given below. Under the following prices, is the individual maximizing utility for a given expenditure? Why or why not? 5. Let's say that the combination of food that maximizes your satisfaction for lunch consists of one cheeseburger, one slice of apple pie, and one cup of coffee. According to the marginalutility-over-price approach to making consumer decisions, you should continue to consume this mix of foods for lunch the rest of your life. True or false? Explain. 6. It is a common practice in restaurants for customers to be given as much coffee as they desire free of charge when they purchase a meal. Under these circumstances, what is the marginal utility of the last cup of coffee; that is, what should be the marginal utility of the last unit consumed of goods received 'free'.