The University of the West Indies
(Open Campus)
ECON2000 Intermediate Microeconomics I
Combined Assignment
Semester 1, XXXXXXXXXX
Due by Wednesday, December 16, 2020 @ 11.59PM ECT
INSTRUCTIONS FOR COMBINED ASSIGNMENT
THE ANSWERS MUST BE TYPED OR HAND-WRITTEN CLEARLY. ALL
STUDENTS MUST UPLOAD THEIR ASSIGNMENTS VIA THE DROPBOX LINK
PROVIDED ON THE LEARNING EXCHANGE PAGE.
You are required to ANSWER ALL questions. Points WILL NOT be awarded for co
ect answers
only. You must SHOW ALL working. The aim of this assignment is to assess your understanding of
microeconomic concepts and the ability to analyze problems in a clear and concise manner.You should
use as many mathematical details as possible which can be a combination of graphs and equations.
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1. (10 marks). Find the equili
ium points for (Q,P1, P2) of the two commodity demand and supply
market function below. The equili
ium condition may be summarized as Qdi = Qsi.
Qd1 = 24 − 8P1 + 2P2
Qs1 = −6 + 12P1
Qd2 = 28 + P1 − 8P2
Qs2 = −6 + 2P2
2. (5 marks). A competitive firm has the short-run cost function C(y) = 4y3− 2y2 + 10y+ 2. At what
price will the firm agree to produce in the short-run? What is the shutdown condition for this firm?
3. (5 marks). The production function of a competitive firm is described by the equation y =
2x
1/2
1 6x
1/2
2 . The factor prices are p1 = $3 and p2 = $4 and the firm can hire as much of eithe
factor it wants at these prices. What is the firm’s marginal cost?
4. (5 marks). What is the price elasticity of demand given
P = $4 and Qd = 1100 − P 2
5. You are employed as a research and development manager for a production company. The chief ex-
ecutive officer of the company has asked you to generate costing data to better assist in expansionary
planning for the company. You are required to generate costs data from the equation below.
C(y) = 12y2 + 6y + 3 assume 10 < y ≤ 30
Calculate each cost for (a)-(f) in terms of $ values based on your selected (y) and provide a graphical
epresentation of all cost curves from (a)-(f) on one graph. Please note that the graph need not to be
drawn to scale but all curves should be labeled clearly.
(a) (1 mark) variable costs;
(b) (1 mark) fixed costs;
(c) (2 marks) average variable costs;
(d) (3 marks) average fixed costs;
(e) (4 marks) average total cost;
(f) (4 marks) marginal costs.
6. (15 marks). Optimize the Co
-Douglas production function given the following parameters. The
maximum about of money available to spend is $1, 200 where the price of K = 12 and the price of
L = 6. That is Pk = 12 and Pl = 6. The function is given as q = K
0.4L0.6. Using the Lagrangian
method, what are the optimal values of K0 and L0?
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7. Suppose you are employed at a monopolistic company as a research (pricing) economist and you are
deriving the behavior of two markets based on demand curves given by:
D1(p1) = 50 − p1
D2(p2) = 50 − 2p2
Assume that the marginal cost is constant at $8 a unit.
(a) If it can price discriminate, what price should it charge in each market in order to maximize
profits? (5 marks)
(b) If it can’t price discriminate, what price should it charge? (5 marks)
8. Pele enjoys coffee (C) and tea (T) according to the function
U(C, T ) = 6C + 8T
(a) What does her utility function say about her MRS of coffee and tea? (1 mark)
(b) Suppose the price of coffee (PC) and the price of tea (PT) are both $3. If Alana has $12 to spend
on these products,
i. How much coffee and tea should she buy to maximize her utility? (5 marks)
ii. Draw a carefully labeled graph of her indifference curve map and her budget constraint. Put the
quantities of coffee on the horizontal axis. Be sure to identify the utility maximizing point.
(2 marks)
(c) Would Alana buy more coffee if she had more income? Explain. (2 marks)
(d) Suppose the price of coffee fell to $2. How would her consumption change? (5 marks)
END OF ASSIGNMENT
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