Class Work 1

CEMBA/CEMPA
CLASS EXERCISE TIME ALLOWED: 1 HR

QUESTION 1
A firm incurs a fixed production cost of GH¢1280 and a variable cost of GH¢80 per unit of output. Its demand function Q is P ! 100 
20

where P = price and Q = quantity. a) Write down an equation for the total cost. b) Express revenue as a function of Q. c) Express profit as a function of Q.

QUESTION 2
Solve the following equation for x using indices.

5

x2

! 125

2 x

QUESTION 3
Each lorry working for a haulage firm drives between 30,000 and 45,000 miles a year. The company fits a statistical model to relate the miles travelled by each of its lorries last year to the revenue earned by each. They obtained the relationship

R ! 0.05m 2  6m  100
where R is revenue (GH¢1000) and m is miles (1000s).
a) How much revenue would you expect a lorry doing 40,000 miles in a year to earn? b) How many miles a year must a lorry drive to earn revenue of GH¢35,000 a year.

QUESTION 4
A firm has the supply equation as

Q

!

1  2 3 2 P

P

 20

and the demand equation as

Q

!

 10

where P = price and Q = quantity demanded. Determine the equilibrium price (P) and quantity (Q).