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Sample Problem Set MM-YAI - April 18, 2020

This document contains 4 problems related to managerial economics. Problem 1 asks the consumer to maximize utility given budget and price constraints. Problem 2 similarly asks to maximize utility with different parameters. Problem 3 involves deriving demand functions and calculating elasticities. Problem 4 analyzes production functions and costs for a firm employing variable labor in the short run.

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Jono Waluyo
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50 views

Sample Problem Set MM-YAI - April 18, 2020

This document contains 4 problems related to managerial economics. Problem 1 asks the consumer to maximize utility given budget and price constraints. Problem 2 similarly asks to maximize utility with different parameters. Problem 3 involves deriving demand functions and calculating elasticities. Problem 4 analyzes production functions and costs for a firm employing variable labor in the short run.

Uploaded by

Jono Waluyo
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Problems Set 1

Subject : MANAGERIAL ECONOMICS


Lecturer : Irsan Azhary Saleh
Date : April 18, 2020

1. A consumer spends $360 per week on two goods, X and Y. Px = $3 and Py = $2. His
utility function is U = 2X2Y. What quantities of X and Y does he buy each week in
equilibrium ?

2. A consumer spends $450 per week on two goods, X and Y. Px = $5 and Py = $3. His
utility function is U = .5XY2 . What quantities of X and Y does he buy each week in
equilibrium ?

3. An individual lives in a world where there are only two goods, X and Y . His utility
function per period is :

U = 50X – 0.5X2 + 100Y – Y2

The price of X is 4 and his income per period is 672.

(a) Derive his demand function for Y.


(b) If the price of Y is 14, how much X does he buy ?
(c) At this equilibrium, calculate his point income elasticity of demand for X.
(d) The individual is given the opportunity to join a society whose members can buy Y at
a price of 5. This would be the individual’s only benefit from membership. What is
the maximum amount that he would just be prepared to pay in membership dues each
period to join the society ?

4. A firm use capital and labour to produce widgets. In the short run capital is fixed, while
labour is variable. The short-run production function is

X = -L3 + 24L2 + 240L

Where X is the number of widgets produced per week, and L is the number of workers
employed. Each worker works a 40-hour week. The wage rate is $12 per hour.

(a) Calculate the range of values for L over which the firm is in (I) Stage I, (ii) stage II,
(iii) Stage III.
(b) What is the minimum product price at which the firm will operate in the short run?
(c) The product price, over which the firm has no control, is such that the firm’s
maximum possible pure profit is $1,096 per week. In order to achieve that level of
profit it must employ 16 workers. How much is the firm’s total fixed cost?

===ias/2020===

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