ECONOMICS REVIEW QUESTIONS

TUKUYU SECONDARY SCHOOL

ECONOMICS REVIEW QUESTIONS (THEORY OF THE FIRM,
PRODUCTION, THEORY OF DEMAND AND SUPPLY)

𝑳𝟑
1. The production of a given firm is Q =40L +3L2 -
𝟑
Where L=The amount of variable input purchased
Q = Quantity of output produced
Calculate
a. The number of L in which Q is increasing at increasing rate
b. The number of L in which rational producer will operate
c. Marginal product of labour
d. The average product of labour
2. a)Explain the relationship between the marginal and average product
b) A firm has the following short run production function
Q =150L +18L2 -1.5L3
Where Q =Quantity of output per week
L =number of workers employed
i. When does the law of diminishing returns take effect?
ii. Calculate the range of value for labour over stage I, II, and III
iii. At what output MPL will be zero
iv. Determine the TPL when 6 workers are employed
v. What number of labour will equate the APL and MPL
c) Differentiate large scale of production from small scale of production
3. Define the following
i. average product
ii. marginal product of Labour
b) The following table is derived from a production of firm x
Labour TP MPL APL
1 10
2 24
3 42
4 56
5 65
6 72
7 77
8 80
9 81
10 81

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i. Calculate the marginal product and average product for each Labour level
ii. Present graphically the data from the completed table above
iii. Explain the law of economics portrayed by the curve
𝐿2
4. Given that APL = 40 + 3L -
3
a. Express the marginal product function.
b. State the maximum number of labour employed in the first stage of
production.
c. How many workers are required in order to maximize output?
d. Calculate maximum possible level of output.
e. A rational producer can either produces in a stage one nor in stage
three, provide reasons.
5. a) Describe main features of monopolistic competition market structure
(b) The following figure refers to a firm’s production department
 Number of workers employed = 1000
 Wage rate per worker = Rs 25
 Value of raw materials = Rs 15000
 Rent of the factory = Rs 5000
 Interest on borrowed money = Rs 2000
 Expenses on power and fuel = Rs 2000
 Number of unit produced = 700 Unit
Required:
i. Calculate the Total Variable Cost (TVC)
ii. Calculate the Total Fixed Cost (TFC)
iii. Calculate the Total Cost (TC)
iv. Calculate the Average Fixed Cost (AFC)
Given
Q = -0.1L3 +6L2 +12L
Where Q = Level of output
L = labour
a. How many labour are employed if APL is maximized?
b. How many labour are employed if MPL = APL
c. What quantity of Q is produced when average variable cost is
minimized
d. At what output marginal product of labour will be zero
e. Determine total product of labour when 20 workers are employed
f. At what output level the total product of labour will be at maximum
g. How many labour will be employed when MPL is equal to zero
(MPL=0)

6. a)Explain four (4) factors which determine the choice of production technique
b) You are given a production function
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 ECONOMICS REVIEW QUESTIONS

Q = 10L +15L2 +L3

Q is total output
L is units of labour
i. Determine the number of labour employed at the point of diminishing
returns
ii. The number of labour required to maximize output
iii. The number of labour employed when APL is at maximum
iv. The output produced at maximum MPL
7. a)what is meant by the term production functions
b)Given
𝐿2
APL =80L -
3
Compute
i. maximum output
ii. number of labour employed at maximum output
iii. number of labour employed at first and second stage of production
iv. why rational producer will produce at second stage of production
8. given the following table

LAND LABOUR TOTAL AVERAGE MARGINAL

PRODUCT PRODUCT PRODUCT
20 1 80
2 170
3 270
4 368
5 430
6 480
7 504
8 504
9 495
10 480

a) Fill in the blanks

b) Present the data graphically showing the optimal level of output
c) At what level of output is the law of diminishing marginal returns starts to
operate
d) Briefly explain the significance of the law in economics

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9. Study the table carefully then answer questions that follows

LAND 10 10 10 10 10 10 10 10 10
LABOUR 0 1 2 3 4 5 6 7 8
TOTAL 0 20 50 90 120 140 150 140 130
PRODUCT
a. Calculate APL, and MPL
b. Present the data graphically showing the stages of production
10
c. If the expression APL= +12 – L
𝐿
i. How many labourers will be employed at the maximum total
output
ii. What is the size of possible maximum output?
iii. Give the expression of algebraic functions of total product
function3 and marginal product function
𝑳𝟑
10. Given TPL= 40L+3L2 -
𝟑
Compute
i. The number of labour employed at maximum output
ii. Marginal product functions
iii. Average product functions
iv. Maximum total product of labour
11. a)Suppose that a firms production function has been estimated as
Q = 5K0.5L0.5
Where Q= unit of output
K = machine hours
L = labour hours
Suppose that the amount of K is fixed at 100 machine hours
i. What is the firms total product equation? Graph the total product
of labour equation for values L =0 to L=200
ii. What is the marginal product of labour equation? Graph the
marginal product of labour equation? Graph the marginal
product of labour equation for values L=0 to L =200
iii. What is the firm’s average product of labour equation? For
values L= 0 to L=200
b) Critically analyse recardian theory of rent and explain how it differs from
modern theory of rent

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THEORY OF THE FIRM

12. . Derive mathematical relationship of the following
a. Marginal cost against marginal product
b. Average product against average variable cost
13. a) Define
i. Implicit cost
ii. Economic cost
iii. Accounting profit
a. The following information was extracted from the book of accounts of kanoike
company dealers in road construction. Price of labour 10000/=Tshs Quantity of
labour 100units.Price of capital 100000/=Tshs, Quantity of capital 150 unit. The
total output of the inputs above is 800kms .Moreover the general manager
revealed that his company had foregone some interest of about 50000/=Tshs
which could be obtained by the company if the money were deposited in the
bank during the period. Assuming that the price per km constructed is
200000/=Tshs ,Find
i. Total cost of production
ii. Total implicit cost
iii. Total explicit cost
iv. Total revenue
v. Economic profit
vi. Accounting profit
14. The XYZ Company is a perfect completion firm that can sell its entire output TSH
18 per unit. XYZ Total cost function is
TC=6 +33Q- 9Q2 + Q3
Where Q represents units of output
a) What is the firm’s total revenue function?
b) What are the marginal revenue, marginal cost and average cost
Equations?
c) What is the total profit equation?
d) What is the marginal profit equation?
e) Use optimum techniques to find the profit maximizing output level.
15. a)Enumerate any five (5) type of diseconomies of scale that a firm face as a result of
expanding scale of production
b) A typical firm in a monopolistically competitive industry faces the following
demand and total cost equation for its product
𝑷
Q = 20 -
𝟑
TC = 100 -5Q + Q2
i. What is the firms short run profit maximizing price and output level
ii. What is the firm’s economic profit?

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iii. Suppose that the existence of economic profit attract new firms into the
industry such that the new demand curve facing the typical firm in this
𝟑𝟓 𝑷
industry is Q = - assuming that no change in the firm total cost
𝟑 𝟑
function, find the new profit maximizing price and output level
iv. Is the firm earning an economic profit?
16. . a) Why a firm continue to produce even when its average variable cost (AVC) are
greater than its average revenue (AR)
b) A typical firm in a monopolistically competitive industry faces the following demand
and total cost equation for the product
𝑷
Q = 20 -
𝟑
TC = 100 – 5Q +Q2
i. what is the firm short- run profit maximizing price and output
ii. determine firms profit
iii. find average total cost equation
iv. what is the value of average revenue at profit maximizing output
v. if firms wishes to maximize sales find output and price level that
maximizes sales
vi. find profit at sales maximizing output level
17. Given the following price and average cost function of firm Y
4Q = 280 – P
𝟐𝟎
AC = + 10Q
𝑸
Where p
P = Price
AC = Average cost
Find
i. the quantity of output at which firm will maximize profit
ii. the profit maximizing price
iii. the maximum profit of the firm
iv. the amount of fixed cost
v. the market structure under which the firm operate, Give reasons for your
answer

18. Suppose that the demand function for a product produced by

Monopolist is given by the equation

Q =20/3 – (1/3) P
Suppose further that the monopolists TC of production is
given by equation
TC =2Q2
a) Find the output level that will maximize profit.

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 ECONOMICS REVIEW QUESTIONS

b) Determine the monopolists profit at the profit maximizing output level

c) What is the monopolist average revenue AR function?
d) Determine price per unit at the profit maximizing output level
e) Compare total revenue at the sales maximizing and profit maximizing output
19. a)With the aid of diagram explain short run equilibrium of a firm under
i. Monopolistic competition when it is earning loss.
ii. Perfect competition when it is earning super normal profit.

(b) Given the firm Total Cost Function (TC) and Average Revenue (AR) Curve
TC = 100Q + 50,000
P = 100 - 0.02Q
Compute
i. Level of output at which firm maximizes profit.
ii. Profit maximizing price.
iii. Total profit at profit maximizing output.
iv. Level of output at which firm maximizes sales revenue.
v. Price level at which firm maximizes sale revenue
vi. Profit at which firm maximizes sales revenue.
vii. Compare profit at profit maximizing output and profit at sales
maximizing output
20. a)Mention five factors influencing the size of the firm
(b) A firm faces an average revenue equation AR=100 – 0.01Q while total cost
function isTc=50Q +30,000
(i) At what level of output will a firm maximize profit?
(ii) Compute AR, AVC, AFC and profit
(iii) If the government decides to levy a direct tax 10% on the firm what will be the
new level of profit maximizing output AR, AVC, AFC and Profit?

21. a)Suppose the marginal cost function of a firm is MC(Q)=Q2-4Q+5,The firm total fixed
cost is 10
i. Determine the firms total cost function
ii. What is the firms total cost of production at Q=3?
b) The milking manufacturing firm has the following estimated cost function
TC=100+12Q+0.06Q2
Where Q is 100 gallons of milk, determine the following
Functions
i. Average total cost function (ATC)
ii. Average variable cost (AVC)
ii. Marginal cost (MC)
iv. Total fixed cost (TFC)

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c) Suppose that a firm jointly produces two goods, goods B is a by -product of the
production of good A, the demand equation for the two goods are
QA = 200-10PA
QB = 120 -5PB
The firms total cost equation is TC =500 +15Q +0.05Q2
i. What is the profit –maximizing price and output for each product?
ii. What is the firm’s total profit?

22. Study the diagram below

On your answer sheet reproduce the graph and

a. Indicate the profit maximizing output
b. Indicate the output at the optimum size of the firm
c. Does this firm make profit or loss? Explain
d. Shade the area showing whether the firm is making profit or loss
e. What market structure is depicted by the figures above? Give reason
f. What type of the firm is this?

23. Suppose that the demand functions for a product produced by monopolist is given by
theequation
𝟐𝟎 𝟏
Q= - 𝑷
𝟑 𝟑
Suppose further that the monopolist TC of production is given by equation
TC = 2Q2
a. Find the level of output that will maximize profit
b. Determine the monopolist profit at the profit maximizing output level
c. What is the firm average revenue function

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d. Determine price per unit output at profit maximizing output level

e. Determine the monopolist profit at sales maximizing output level
f. Compare total revenue at the sales maximizing profit and profit maximizing
output level

24. Given the firm total cost function (TC) and average revenue(AR) curve

TC =100Q +50,000
P = 100 -0.02Q
Compute
a. Level of output at which firms maximizes profit
b. Profit maximizing price
c. Total profit at profit maximizing output
d. Level of output at which firm maximizes sales revenue
e. Price level at which firm maximizes sales revenue
f. Profit at which firm maximizes sales revenue
25. a)Summarize the characteristics of the four basic market structure with reference to
the following sub heading
i. Number of firm
ii. Type of product
iii. Condition of entry
iv. Control over price
v. Use of non price competition

b) In which market structure would you place each of the following

i. Petrol dealer
ii. A local outomobile dealer
iii. An orange grower
iv. A gas and electric company

26. Assume that the demand curve for monopolist is Q =50 -0.5P and cost function is
50 -40Q and P=100-2Q
Where
Q = output
P= price
Required
a. Find profit maximizing output
b. Calculate price at which firm maximize profit
c. Monopoly profit
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d. Average total cost at profit maximizing price

e. Average revenue
27. What is meant by division of labour and specialization? Explain four advantages of
division of labour (10marks)
b)A FG is producing Toshiba laptop computer has production function given by
Q =20√𝑲𝑳 in the short run the firm amount of capital equipment is fixed
at
k =100, the rental rate for capital (k) is USD 10 and the wage rate is USD 40
REQUIRED
i. Calculate short run total cost and average cost functions
ii. Assuming the firm intend to produce 25 laptop computer what is the value
of short run total cost (STC), short run average cost (SAC), short run
marginal cost (SMC)
28. Define price elasticity of demand, Explain the relationship between Total revenue
(TR) and price elasticity of demand
b) Colgate sell its standard size tooth paste for Tsh 25,its sales have been an
average 8000units per month over past year, recently its close competitor
Binaca reduced the price of its same standard size tooth paste from tsh 35 to
Tsh 30. As a result Colgate sales decline by 1500units per month
i. Calculate the cross elasticity between two product
ii. What does your answer indicate about the relationship between
the two product

29. a)With elastic demand increasing quantity will lead to rise in revenue while with
inelastic demand increase quantity will lead to fall in revenue ,Derive a logical
Relationshipbetween price elasticity of demand and marginal revenue
b) AGFcompany specialize in rapid parcel delivery, Holding income and prices of
other goods constants the demand equation is estimated to be
P =66Q-1/3
Where P is the price and Q is pound delivered, the marginal cost of delivery is
constant and equals to 2 per pound
i. What is the point price elasticity of demand?
ii. What are the profit maximizing price and quantity?
iii. What are the total revenue maximizing price and quantity?

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30. From your knowledge of the relationship between various concept of cost of
production fill in the blanks in the table above

Q TC TFC TVC ATC AFC AVC MC

0 125
10 5
20 10.5
30 110
40 255
50 3
60 3
70 5
80 295
31. Highlight main differences between oligopoly market and monopolistic competition
b) Carefully study the table below and fill the empty slot
Q K L FC VC TC AFC ATC MC
0 3 0 1500
13 3 1 400
27 3 2 800
39 3 3 1200
50 3 4 1600
59 3 5 2000
64 3 6 2400
66 3 7 2800

Q=output, K=capital, L=Labour, FC= Fixed cost, VC= variable cost, TC=total cost,
AFC =Average fixed cost, ATC = Average total cost, MC =marginal cost
32. a)Explain the circumstances under which a firm’s long-run average cost curve
may be (i) U-shaped; (ii) L-shaped.
b) Copy and complete the table by filling the FC, VC, AFC, MC and TR columns.

Output 0 1 2 3 4 5 6 7 8

Total 600 1650 1850 2100 2400 2800 3400 4300 5800
cost

Hence workout the following:

i) What is the average fixed cost the output is 4 units?
ii) If the marginal revenue is constant at 600 per unit of output. What would be the
equilibrium output of the firm?
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iii) What level of output represents the break-even point of the firm?

33. Study the table below and respond to questions that follow
Q FC VC TC MC AFC AVC ATC
0 100
1 100
2 80
3 70 116.7
4
5 500 450
6 800

a. Complete the table by filling the empty slots

b. Draw a graph of FC, VC, TC

34. a)Consider a firm with the following fixed cost and marginal cost ,in the table below
i. fill in the blanks for TFC,TVC and TC
ii. on the set of Y- axis and X –axis construct a graph that illustrate TVC, TFC and
TC curves
OUTPUT TFC TVC TC MC
0 -
1 3
2 2
3 15 1
4 2
5 5
6 9
7 14
8 20

b)If the demand curve for a firm is AR=200 -0.02Q facing production cost
asTC = 100Q +50000
Compute
i. profit maximizing level of output
ii. AR and MC
iii. Under what market structure a firm is producing

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35. What factors which determine price elasticity of demand

b) A market for a commodity consist of three individuals A, B, and C whose
function for commodity are given below
QA =40 -2P
QB =25.5 -0.75P
QB =36.5 -1.25P
i. Find out the market demand function
ii. If the supply function is given by QS=40+3.5P determine the equilibrium
price and quantity
36. a)Study the information in the table below for commodities K, N and M then answer
questions that follows
Quantity K (kg) Price o N (Tshs) Price of M (Tshs)
10 20 10
60 40 5

Required:
i. Calculate cross elasticity of demand of commodity K with respect to N and M
ii. How is commodity K is related to N and M?
b) The demand function for a commodity is given by Q=500 – 3Pr + 0.1Y-3P
Where, P = price, Pr = Price of rival product and Y = income. Also, P = 10, pr = 20 and
Y= 600.
Calculate:
i. Price elasticity of demand
ii. Income elasticity of demand
iii. Interpret your answer in (i) and (ii) above
37. a)Study the information in the table for commodities W,Y and Z and answer the
questions that follows
Quantity of w in kg Price of (Y) Tshs Price of Z (Tshs)
10 20 10
60 40 5
Required
i. Calculate cross elasticity of demand of commodity W in respect to Y and
Z
ii. How is commodity W related to commodity Y and Z
b) A market consists of 20 firms, each firm face an identical supply function as
Qs =20+2P If the market demand function is given as Qd = 900-10P
Calculate
i. The equilibrium price and quantity
ii. Elasticity of demand at P =8
iii. The elasticity of supply when price changes from equilibrium to
15Tshs

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iv. The amount of shortage or surplus when price is 8 units

38. a)suppose the demand curve for a product is given by
Qd = 300 -2P + 4i
Qs = 3P -50
Where ( i ) is an average income
i. if i =25 find market clearing price and quantity for the product
ii. if i =50 find the market clearing price and quantity for the product
b) Given the demand and supply schedule below

Price Quantity supplied Quantity demand

3 2 34
6 4 28
9 6 22
12 8 16
15 10 10
18 12 4
i. what is the equation for demand
ii. what is the equation for supply
iii. graphically or otherwise find equilibrium price and quantity

c) Use given demand functions to solve the following problems

Qx = 100 – 8PX +0.5PY +21
Where
Qx = Quantity demanded of goods X
Px = Price of good x
Py =Price of good y
I = Income
Px =7, Py =12, and I =4.5
i. Calculate price elasticity of good x
ii. Calculate the cross elasticity for the given values
iii. Is good Y a substitute or complementary product?
39. a)Give economic interpretation for each of the following case( hint ; give example of
goods for each case)
i. cross elasticity of demand for two goods is zero
ii. cross elasticity for two goods is negative

b) Discuss the effects on the market of bicycle where there is

i. increase in consumer income
ii. a rise in the price of petrol

c) What are the practical application of the concept of price elasticity of demand in
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the economy
40. a)Explain how equilibrium price and quantity will change in the following cases
i. Demand for commodity increases the supply remaining the same
ii. Demand for and supply of a commodity increases by an equal amount
iii. Demand for a commodity decreases and supply of a commodity
increases
b) A market for a commodity consist of three individuals A, B, and C whose functions
for commodity are given below
QA =40-2P
QB =25.5- 0.75P
QC = 36.5 -1.25P
i. Find out the market demand functions
ii. If the supply functions is given by Qs =40+3.5P determine the equilibrium
price and quantity

41. Study the information on commodities A,B,C and D

QUANTITY DEMAND
YEAR INCOME A B C D
2012 40 80 100 150 120
2013 100 40 250 150 150
i. What type of elasticity of demand is represented by the table above
ii. Calculate the elasticity of demand for each commodity from 2012 to
2013 and give the economic interpretation
b) Briefly explain any five (5) practical importance of price elasticity of
demand
42. a)define price elasticity of demand
b)If at price of sh5/=per kg consumers buy 1000kg of commodity X per month and
when the price rises to tshs 6/= the quantity brought falls to 200kg per mouth
i. calculate price elasticity of demand in this case
ii. comment on the result
c) Consider the demand equation
Q=25-3P
Where Q represent quantity demand and P selling price
i. calculate the arc price elasticity of demand when P1=4 and P2=3
ii. calculate the point price elasticity of demand at these prices,
comment on the results
43. With the aid of illustration distinguish price floor from price ceiling

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b) Suppose the demand and supply curves of salt are given

Qd = 1000-P
Qs = 700 +2P
i. Find equilibrium quantity and price
ii. Now suppose that the price of input used to produce salt has
increased so that the new supply curve is Qs =400 +2P how does
the quantity change?
iii. Suppose the government has imposed a tax of 3 per unit of sale
of salt, How does it affect the equilibrium price and quantity
c) Highlight four factors affecting demand for food stuff in Tanzania

44. a)Explain the effect of change in price of total revenue for different
elasticity’s coefficient
b) Suppose that there are 100 identical with the demand curve Q =10-2P
i. What is market demand and curve?
ii. Compute the equilibrium price when supply is fixed at Q= 400
iii. Compute elasticity of demand for each person at the market
equilibrium price
iv. Draw the market demand curve
45. the market demand and supply equation for a Commodity are

Q2 = - 10p + 50
𝟏𝟎
P = Q2 + 25
𝟐𝟓

i. With a reason identify supply equation and demand equation

ii. Solve for equilibrium price and quantity

iii. Suppose that the government imposes a price ceiling on the commodity of

3/= and demand increases to Qd = 75 – 100P. what is the impact on the

market of the government actions

iv. The demand equation is Qd = 50 -2.25P. Calculate the point price elasticity

of demand if

P=2

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46. a)Given the following demand equation of economic books

Q1=Q2 = -2.5P+550
Where Q = Quantity demand
P = price measured in Tshs per economic books
Required
i. derive the market demand function for economic books
ii. if there are 900 economic books in total what price should be charged to sell the
entire collection
iii. sketch the market demand curve
47. a) Give seven reasons why the supply curve of Labour may be regressive
b) Commodity A has the following information
The income elasticity of demand is 2.5
Price elasticity of demand is -2.3
The cross elasticity of demand with respect to commodity B is 3.8
i. Examine the significance of each of these figure for commodity A
ii. Explain the meaning of these data
c) Use diagram to illustrate how each of the following events affect
the equilibrium price and quantity of SONY TELEVISION
i. The income of a consumer rise and Samsung television is superior good
ii. Government increase indirect tax on manufacturing of sony television
48. The demand functions of good is
Q= 300-20P1P2+3P2Y
Where
P1= Price of goods
P2= Price of other goods
Y = Income
If P1= 10, P2 =5, and Y= 500
Calculate
i. Own price elasticity of demand and interpret your answer
ii. Income elasticity of demand and interpret your answer
iii. Cross elasticity of demand and interpret your answer

49. Given the following equation

𝟏
P1 = 5 - Q
𝟑
𝟏 𝟓
P2 = Q -
𝟐 𝟐
i. Giving reasons identify demand and supply equation
ii. Graphically solve for the equilibrium price and quantity
iii. If the government imposes high tax on the price of the commodity what
will be the reaction of consumers, producers, and government
revenue
iv. Calculate price elasticity of demand and supply
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v. W is complement to V and substitutes to M what will be the effect on

the price and supply of V and M of a rise in price of W?
50. a)Given the following individual demand equation
Qd1 =Qd2 =Qd3 =550-2.5P
Where
Qd = quantity demanded
P = Price measured in Tsh per economics book
Required
i. derive the market demand for economics books
ii. How many more economics books will be bought for each price reduction?
iii. If there are 900 economics books in total what price should be changed to
sell the entire collection
iv. Sketch the market demand curve
b) Explain with illustration the effects which will each of the following have on the
demand
for product X
i. Product X become more fashionable
ii. The price of complementary product Y falls
iii. Income decline and commodity X is an inferior goods
iv. Consumers anticipate that price of X will fall in the near future
v. Foreign tariff barrier in X are eliminated
51. a) Briefly explain the following statements
i. . Demand for food in general is inelastic but demand for a
specific food is elastic
ii. Demand for any factor of production is said to be derived
iii. In real sense all commodities are competitive demand
b) State nature of price elasticity of demand when ep=0, ep=1, ep>1, ep<1, ep=∞, Then
explain what will happen to Total revenue with respect to price elasticity’s above.
52. ) on the table provided below summarize the distinctive features of various type of
market structur(i) Is given as an example
Characteristics/market Perfect monopolistic oligopoly Monopoly
type competition
i. Number of firm Very large many few One
ii. Type of product
produced
iii. Control over
price
iv. Condition of
entry
v. Non – price
competition

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 ECONOMICS REVIEW QUESTIONS

53. The market equation for a product sold by a monopolistically competitive firms
Qd = 100- 4P
Total cost of production of firm is
TC = 500 +10Q +0.5Q2
i. calculate equilibrium price and quantity
ii. is the firm producing in the long run or short run equilibrium, Give reason
to support your answer
iii. find the average fixed cost of a firm at equilibrium
54. )Distinguish between the following
i. income elastic and income inelastic
ii. Veblen and Giffen goods
iii. Extension in demand and extension in supply of commodity
iv. Market demand and market supply for a product

b) When the price of product is shilling 5 per unit, firm gets shillings 2750 from the
Sale of product and when price of product rises to shillings 7 per unit, it gets
Shillings 4700 from the sale, calculate the coefficient of price elasticity of supply
c) The market research department of paradox enterprises has determined that the
Demand for fingold is Q= 1000 – 5P +0.05I- 50Pz where P is the price of glibdibs,
I is income, and Pz is the price of ballzacks, suppose that P = 5, I =20000 and
Pz = 15
i. Compute the price elasticity of demand for fingold
ii. At p=5 compute income elasticity of demand for fingold
iii. At p=5 compute the cross price elasticity of demand for fingold
55. a)Given the following table

PRICE (TSHS) QUANTITY

DEMANDED (KG)
10 2
8 10
7 16
6 22
5 30
4 40
3 5

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 ECONOMICS REVIEW QUESTIONS

i. When price fall from 8/= to 7/= demand rises from 10 to 16 what is the
technical terms for this change in quantity demanded
ii. At which price is total expenditure( revenue ) maximized
iii. What is the price elasticity of demand when price fall from 8/= to 7/=

b) Given the following data

Price Tshs Quantity

45 65000
55 35000
i. Calculate the coefficient of arc elasticity of demand if the price rises from Tshs 45
to Tshs 55/=
ii. Why do we insert a negative sign in the demand elasticity?
iii. Why the slope of a demand curve is a poor index of its elasticity.
56. With example explain various forms of inter related supply
b) Give economic interpretation and example of good for each of the following
i. cross elasticity of demand for good X and Y is 0.4
ii. income elasticity of demand is 0.6
iii. price elasticity of demand is 0.7411
iv. cross elasticity of demand is -0.83045
v. income elasticity of demand is zero
57. a)Account for the factors that leads to rise of monopoly( 4 points)
b) Given the TC function
TC =100+50Q -12Q2 +Q3
Where Q= is the level of output
i. Determine TFC,TVC,AVC, and MC functions
ii. Calculate the TC,ATC, AVC and MC when the firm produces 10 unit
of output
iii. Calculate level of output at which AVC is minimum
iv. Calculate level of output at which MC =AC
58. AJ Ltd has estimated the following revenues and expenditures for the next fiscal
year
Revenue 6800000
Cost of goods sold 5000000
Cost of labour 1000000
Advertising 100,000
Insurance 50000
Rent 350000
Miscellaneous expenses 100000
a. Calculate AJ Ltd accounting profit

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 ECONOMICS REVIEW QUESTIONS

b. Suppose that to open her AJ ltd business AJ ltd gave up 250000 per year job as
a buyer at the exclusive hammocker department store, calculate AJ economic
profit
59. a)Suppose that a firm production function has been estimated as
Q =5K0.5L0.5
Where
Q = Unit of output
K = Machine hours
L = Labor hours
Suppose that the amount of K is fixed at 100 machine hours
i. What is the firm total product equation?
ii. What is the marginal product of labour equation?
iii. What is the firm’s average product of labour equation?
b) Briefly state Recardain theory of rent, then highlight seven (7) assumption of
the theory
60. a)distinguish between change in quantity supply and change in supply
b) Given Q=62 -2P +0.2I +25A
Where
P =price, I=Income, A =Advertising expenditure
Assuming that P =4, I=150, and A =4
i. Calculate price elasticity of demand and interpret your answer
ii. Calculate income elasticity of demand interpret your answer
c) Explain with illustration
i. Change in demand due to increase in income
ii. Change in demand due to decrease of price of substitute
iii. Two good that are jointly supplied
61. a)What factors influenced location of Mbeya cement factory at Songwe Mbeya
b) The following data represent a monthly cost structure for Mbeya cement
factory as per December 2015
The number of workers employed ……………… 10000
Wage rate per worker………………………. 250000
Value of raw materials………………….. 15000000
Rent of factory building………………… 500000
Interest payable on borrowed money ………. 4000000
Expenses on transporting materials………….. 50000000
Expenses on power and fuel………………….. 20000000
A flat rate bill of water………………….. 600000
Advertising expenses…………………… 700000
Capital consumption……………………… 60000000
Number of output unit produced………………. 60000kg

i. Calculate TFC,TVC,TC,ATC and AFC

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 ECONOMICS REVIEW QUESTIONS

ii. If the total sales from the production is Tshs 100000000 state
whether the firm is making profit or not, of what extent
1
62. Given the function Q= 40L +3L2+ L3
3
Where Q= total product of labour
L = Units of labour employed
Calculate
a. The number of labour employed when Q is at maximum
b. The maximum average product of labour of labour
c. The maximum marginal product of labour
63. Use demand and supply functions given below to answer the questions that follows
Qd = 1000 -5P
Qs = 20P
Where
Q d = quantity demand
Qs = Quantity supplied
P = Price
a. What is equilibrium price and quantity
b. Draw a demand and supply curve on the same diagram and show the
market clearing point
c. Calculate excess supply when price is equal to 100Tshs
d. Calculate excess demand when price is equal to 10 Tshs
e. Calculate price elasticity of demand at the market clearing point
64. Consider the following cost and demand function of a firm
4P + Q = 16
−4
= 2 –AC – 0.3Q + 0.05Q2
𝑄
P= Price Tshs
AC = Average Cost
Q = quantity of output produced (units)
a. Find the price and output that will maximize profit of the firm
b. Find the level of output that will minimize marginal cost
c. What market structure the firm is operating? Give reasons for your answer
65. Consider a profit maximization firm, suppose the market price for its product is Tsh
50.and a firm faces a total cost function given by
TC =100 +50Q2
a. Write down a firms total revenue function
b. Write down a firms profit function
c. Using profit function in (ii) above calculate the firms profit
maximization level of output
d. Calculate value of total revenue function at profit
maximization level of output

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 ECONOMICS REVIEW QUESTIONS

e. Calculate the firm’s marginal revenue and state in which

market structure does the firm operates. Give reasons to
support your answer
66. a)The following are different type of production function. Determine whether each
one has constant, increasing or decreasing returns to scale
a. Q=20L+20K+50
b. Q=30L2+25K2
c. Q=40L+20K+10LK
d. 25L0.4K0.8
e. 20L0.3K0.6M0.2
b) Explain eighty (8) characteristics of labour as a factor of production.
67. The following table shows the long run changes in output resulting from employing
the factors of production by firm X

Unit of labour 4 8 12 16 20 24
Unit of land(acres) 20 40 60 80 100 120
Total output(tones) 100 250 420 560 672 780
Total cost(sh’000) 200 400 600 800 1000 120
a. Determine
i. The rate of an increase in size of the firm
ii. The rate of an increase in total output
b. Over which output range will the firm be operating under
i. Constant return to scale?
ii. Increasing return to scale?
iii. Decreasing return to scale?
68. a)Show in the diagram the effect on the demand curve, supply curve ,the equilibrium
quantity of each of the following events
i. The market for newspapers in town
Case 1: The salary of journalist in town goes up
Case 2: there is a big news event in town which reported in the
news
Papers
ii. The market for bagels
Case1: People realize how fattening bagels are
Case2: People have less time to make themselves a cooked
breakfast
69. Explain how equilibrium price and quantity will change in the following cases
i. Demand for a commodity increases the supply remaining the same
ii. Supply of a commodity decreases the demand remaining the same
iii. Demand for and supply of a commodity increase by an equal amount

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 ECONOMICS REVIEW QUESTIONS

b) FGA has justified recording his latest CD his record company’s marketing
department determines that the demand for the CD is as follows

PRICE
24 22 20 18 16 14
No of CDs
10000 20000 30000 40000 50000 60000
The company can produce the CD with no fixed cost and variable cost of usd 5 per CD
i. Find total revenue for quantity equal to 10000, 20000 and so on, what is the
MR for each 10000 increase in quantity sold
ii. What quantity of CD’S would maximize profit? What would the price be? What
could the profit be
70. Juma runs a stationary shop at the certain school.Jumas revenue and cost are given

Sales 50000copies
Price 100/= per copy
Rent 1200000/=
Purchase of photocopy machine 1000000/=
Wages for two employees 1200000/=
Paper 2500000/=
Income Juma could earn working 1250000/=
elsewhere
a. Given above information should Juma continue running his business
or shut it down?
b. A monopolistic competitive firm earns zero economic profit in the long
run. Why is it that such firm does note exit business despite earning
zero economic profit.
a. What distinguishes an oligopoly market structure from other market
structures?
71. Market demand for brand X has been estimated
Qx= 1500-3Px-0.05I -2.5Py+7.5Pz
Where
Px- is the price of brand X
I is the per- capital income
Py – is the price of brand Y

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 ECONOMICS REVIEW QUESTIONS

Pz- is the price of brand Z

Assume that Px =2, I = 20000, Py= 4 and Pz=4
a. With respect to changes in per capital income what kind of goods brand X
b. How are brand X and Y related?
c. How are brand X and Z related?
d. How Z and Y related?
e. Calculate price elasticity of demand for brand X
72. a)With the aid of illustration explain
i. Price ceiling
ii. Price floor
b) Consider the following demand and supply equation for the product of a
perfectly competitive industry
Qd = -3P+25
Qs = 10 + 2P
i. Determine the market equilibrium price and quantity algebraically.
ii. Suppose the government regulatory authorities impose a price floor on
this product of P =4
iii. What would be the quantity supplied and quantity demand of this product?
73. Firm long run Total cost is given by
TC = Q3-20Q2+100Q+800
Where
Q is output/product
Demand for product Q is given by
Q(d) =2500-3P
Qd is quantity demand and P is price
i. Determine long run equilibrium price and quantity
ii. Calculate number of firms
b) If demand increases to Qd =3000-3P under assumption of constant price and free
entry
i. Determine total output of the industry
ii. Determine number of firm required to produce such product

74. A firm can sell its product at a price of $150 in perfectly competitive market. Below is
an incomplete table of a firm’s various costs of producing up to 6 units of output. Fill
in the remaining cells of the table, and then calculate the profit the firm earns when it
maximizes profit.

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 ECONOMICS REVIEW QUESTIONS

75. A firm sells a product in a perfectly competitive market, at a price of $50. The firm
has a fixed cost of $30.Fill in the following table and indicate the level of output that
maximizes profit. How would the profit-maximizing choice of output change if the
fixed cost increased from $40 to $60? More generally, explain how the level of fixed
cost affects the choice of output.

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 ECONOMICS REVIEW QUESTIONS

76. Given

Q TR AC TC MC AR MR P
1 100 80
2 180 60
3 240 50
4 280 43.7
5 300 39
6 300 36.6
7 280 37
8 240 38.75
9 180 41
a. Fill in the blanks
b. Plot AR,AC, MR, MC curves
c. Explain the shape assumed by AC curve
d. What level of output may a firm maximize profit
77. If the price elasticity to consumers by TANESCO in Tanzania are P1 = 80 –Q1 and
P2 = 180 -2Q2 while TC = 50 +20Q compute
a. Industrial rate and quantity
b. Domestic rate and quantity
c. Under what market structure is the firm operating
d. Explain the necessary condition for the firm to practice price discrimination
78. Dawasco is the sole supplier of water in Tanzania.It supplies water to different
consumers,if monicas demand for water is expressed as Pm =80 – 5Qm while that of
Veneranda is expressed as PV = 180 – 4Qv if the total cost function is TC = 50 +20Q
Required
a. Price and quantity demanded of water for the two consumers
b. Identify the consumer who demand at the industrial level and that at the
domestic level
c. Explain advantages of monopolistic market structure
79. Tanesco offers electricity to two consumers Asha and Juma ,The price of Asha is
P a = 160 – 10Qa while Juma is Pj = 360 – 40Qj While production cost function is
TC = 100 -40Q
Compute
a. Industrial rate and domestic rate
b. TR ,MR, AR, AFC, AVC in each market structure

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