Principles of Microeconomics Assignment Question and Answer for Pakistan University Students

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Q: 1 Suppose that you are running a fast food chain business on a small stand near the Lake view park Islamabad. It’s a rainy day, and customers are lined up for burgers at your small stand. The following table shows your firm’s short-run production function for burgers.                       (10)


Number of workers Total Output
0 0
1 20
2 50
3 75
4 90
5 100
6 105
7 100
8 90


When does diminishing marginal product begin? How many workers are too many? Use marginal product to decide.


Q: 2 Net sole is a manufacturing company operating in Pakistan since 2000. The company is producing number of home computer and has fixed cost of 2500 rupees. Whereas the marginal cost of producing the computers is Rs. 7000 for the first computer, Rs. 2500 for the second computer, Rs. 3000 for the third, Rs. 3500 for the forth, Rs. 4000 for the fifth, Rs. 4500 for the sixth, and Rs. 5000 for the seventh.                                                              (20)


a).  Construct a table and calculate the company’s output, total cost, marginal cost, variable cost, average cost, and average variable and average fixed cost.


b).  Company may face a zero profit point if so, at what price is the zero-profit? And at what price is the shutdown point?


c).  Since 2000 company is selling the computer in different cities, If the per computer price is Rs. 5000, is the company making profit or loss? And how big is the profit or loss? Draw a graph with Marginal Cost, Average Variable Cost and Average Cost curves to explain your answer and show the profit or loss.


d).  If the company decreases the price of computer from Rs. 5000 to Rs. 3000, is it making a profit or loss? How much is the profit or loss? Draw a graph with Average Cost, Average Variable Cost and Marginal Cost curves to explain your answer and show the profit or loss in graph.


Q: 3     Mr. Shoaib currently works for a Project Management consultancy firm and earning annual salary of Rs. 325,000. Currently he is doing Master of Sciences in Project Management and considering opening his own consultancy firm, where he expected to earn Rs. 500,000 per year once he gets established. To run this firm he would need an office building and a clerk to handle all the documentation. He has found the office on rent of Rs. 350,000 per year. A clerk could be hired for Rs. 175,000 per year. If these amounts are accurate, would Shoaib’s consultancy firm be profitable?                                                    (10)