. Provide solutions to these attachments.

Part II. Do the following questions with all necessary steps 1.Assume labor (L) is the only variable input used in the production process, a firm's production function is given by 0=72 +10 43 -L' where Q represents total product. Classify the production function in to the three stages of production. 2. Answer the following questions based on the following information Labor input (in hour) 0 2 3 4 S 6 7 8 9 10 Total Product( in kg) 0 40 120 220 312 390 455 515 565 565 563 . The firm uses capital as a fixed input and labor as a variable input. . The total cost of capital it uses is birr 100 and the price of labor is 40 per unit. Calculate:Suppose market demand for food is: lU Or : P 1:. {3 points} What is the elasticity ofMand? (Hint: Recall the elasticity of demand is 6P Q 13. {to points} Draw a perfect competition diagram for a market with the cost function and demand function given in this section. Assume it is initially in long-um equilibrium {where the price is given by the long-nut supply]. Be sure to include one panel for the rm and another for the market. Label all curves. Suppose decreased income changes the demand curve to: 2E p 14. {9 points) Illustrate how the market adapts to this change using your diagram from question 13. Include the following labels: a. The initial price, individual quantity, and market quantity should be labeled p", q\Question 1 (total 15 points}. A rm has a production function: f (K . L} = EDLKD'E + LEE 2 LEKE a. What is its short-run production function if capital is xed at K=4'? b. What are the fum's marginal product of labour and average product of labour in the short run? c. Calculate the elasticity of output with respect to labour. Question 2 (total 16 points} . Do the following functions exhibit increasing, constant, or decreasing retiirns to scale? Explain you: answers. a. The production ftmction Q = Wigwam, where M is materials, K is capital and L is laboUr. b. q = L + 0.5K c. u = DELHI\" I d. if = M.3 + 4K Question 3 (12 points]. Find the Marginal Rate of Technical Substitution for the following production functions: 1 | a. 'FLEKE 11 q = L.5 + [(0.5 o. q = L + K Question 4 (Total It} points). Suppose a fum's cost uiction is C = 2q3 lql + Slq. average cost curve is described by the equation AC = 2432 lq + 94). At what output level does the marginal cost curve cross the average cost curve? Question 5. (16 points, 8 points each} For the following, please answer \"True" or "False" and explain why. a. When buying a piece of equipment, it is always bed for the rm to pay cash instead of borrowing the funds since this mnders the equipment less costly. b. University of Tomato is choosing a location for a new building. The university has campuses at Downtown1 Scarborough and Mississauga. A large parcel of land would have to be purchased at Scarborough or Mississauga if the building were to Jugs L be built there. So it is cost-effective to locate the new building at downtown because the university already owns the land. Suppose you are estimating parameters of the following regression model: Y = By + B2X2 + By Xx + Le Where: Y, = average starting pay at graduation, in pounds. Xx = tuition fee in 2012, in pounds. X = independent recruiter rating (maximum is 5.0). It = disturbance term. Using cross-section data on top 50 UK graduate business schools, you obtain the following results: Y, = 9941 + 0.25 X2t + 15125 X3t (6114) (0.121) (7349) R' = 0.87, RSS = 10310 (The figures in parentheses are the estimated standard errors. RSS are residual sum of squares.) (i) Comment on the signs of the variables in the model. (2 Marks) (ii) Interpret and explain individual coefficients. (4 Marks) (iii) Suppose X3 increases by 0.25; what is the expected impact of this change on Y? (2 Marks) (iv) Comment on the explanatory power of the regression. (2 Marks) (v) Using t-tests show whether individual coefficients are significantly different from zero at 5% level of significance. (4 Marks) (vi) Test whether the coefficient of X, is significantly different from 1 at 5% level of significance. (2 Marks) (vii) Carry out an appropriate test to check if coefficients are jointly significant. (5 Marks)e) (12 points) Graph these curves: a. profit-maximizing labor demand: part d (w on vertical axis, L on horizontal axis) b. short-run supply: part b (P on vertical axis, q on horizontal axis) c. profit: from above (T on vertical axis, P on horizontal axis) The graphs do not need to be super-accurate but pay attention to the shape of the curves and where they intersect the axes (if they do) () (12 points) Suppose P = P,. On the 3 graphs from part e, show what happens when w increases from w, to w2- Explain how and why labor, supply, and profit change. 2. (54 points) Short-run costs. Suppose w = 1, r = 10 and K = 20. a) (5 points) We have TC = w (*) q3 + rk = ()q3 +200 On one graph (with q on the horizontal axis), graph the Total Cost, Variable Cost, and Fixed Cost functions. Pay attention to the shape of the curves, where they intercept the axes and each other (if they do), and the position of the curves relative to each other. b) (9 points) Using the graph from part a, show how AC, AVC, and MC can be shown when q = 20. c) (5 points) From the TC function in part a, find Marginal Cost, Average Cost, and Average Variable Cost. d) (8 points) Use the function you found in part c. On one graph (with q on the horizontal axis), graph the AC, AVC, and MC functions. Pay attention to the shape of the curves, where they intercept the axes and each other (if they do), and the position of the curves relative to each other. e) (6 points) Calculate the values of AC, AVC, and MC when q = 20. Show these points on the graph from part d. Relative to each other, are the values for AC, AVC, and MC at q = 20 consistent with the results in part b? f) (6 points) Calculate the price at which this firm would break even (zero profit). What is the optimal output at this price? g) (15 points) Suppose the market price is P = 20. What is the firm's optimal output and profit? With respect to profitability, what is the firm's optimal course of action? Explain