Section 3 Essay-type questions (80 Marks)
Question 1
Distinguish between the following;
1.1. Function coefficient and partial elasticity of production.
1.2. Economies and diseconomies of scale.
1.3. Constant and increasing return to scale.
1.4. Production and production function.
1.5. Explain all the underlying assumptions of production economics.
(20 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
(12 Marks)
Question 2
(20 Marks)
2.1. Consider the following production function, y = lOx + 20x 2 -16x 3 • Derive a function for
2.1.1. The average physical product.
(2 Marks)
2.1.2. The marginal physical product.
(2 Marks)
2.2. At what level of input would the following reach maximum?
2.2.1. The marginal physical product.
(2 Marks)
2.2.2. The average physical product.
(2 Marks)
2.2.3. The total physical product.
(5 Marks)
2.3. Draw a graph to represent the production functions derived above and indicate the
boundary of stage II and stage Ill.
(5 Marks)
2.4. At what stage of the production is the elasticity of production equal to one? (1 Mark)
2.5. At what point on the production frontier does the law of diminishing returns kick in?
(1 Mark)
Question 3
3.1. Given the demand function p = I 00- 2Q,
3.1.1. Express total revenue as a function of quantity demanded (output).
3.1.2. For what value of output (Q) is the total revenue maximum?
3.1.3. What is the maximum value of total revenue?
3.1.4. Sketch a graph to show the output level and the total revenue.
(20 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
(2 Marks)
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