Questions

1. Ali produces paper for sale which requires building and a machine. He pays building rent $ 30 and rents a machine for $ 40 Those are his fixed assets. His other cost can be find with help of given equation

AF= 70/Q

VC = 5Q+ Q2

TC = 70+ 5Q+ Q2

AVC= 5+Q

Calculate and Graph Ali's TC, VC, average variable cost, average total cost, marginal cost for quantity 0-100 with a difference of 10.

2. A monopoly firm having following cost and revenue curves for the prices of 0,10,20,30,40,45,0

MC = 1 + 2Q

AC=10+ 6 / Q

Q = 100 - 2P

MR= 50-Q

Graph all the curves on the same axis and find the optimal level of output and prices. Calculate the profit or loss of the firm.

3. Draw a budget constraint and indifference curves for pizza and Pepsi. Show what happens to the budget constraint and the consumer's optimum when the price of pizza falls. In your diagram, decompose the change into an income effect and a substitution effect. (Hint: Both goods are normal good. Consider Pepsi on X-axis, Pizza on Y-axis)