Wednesday 19th April 2023

2023 – Continuous Assessment Test – April 2023 – DiBA 1030.

Answer all questions: Time allowed is one hour thirty minutes (2:30hr).

1. Tom has a piece of land on which he cultivates heads of cabbages for sale to the nearby shopping
mall. As a rational businessman, his aim is to maximise profits from sale of his produce (Revenue=
Price x Quantity). He can achieve his objective by improving efficiency or productivity of his labour
force. Below is a table of current production statistics for the past month.
Acre of Land No of Workers Total Output Marginal Product Average Product
2 1 50
2 2 110
2 3 180
2 4 240
2 5 290
2 6 320
2 7 330

Required:
a) Calculate the Marginal Product and Average Product ( 3 marks)
b) Advise Tom the number of workers that he requires to employ on his piece of land. Justify your view
( 2 marks)

2. The firm has the following demand and supply functions: Qd = 150 – 4P and Qs = 75 + 6P where “P” is
the price. Required to:
a) Calculate the market equilibrium price and quantity ( 3 marks)
b) Explain clearly what happens if the price is changed to Zmw10 per unit (2 marks)

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3. A firm in Perfect Competition Market Structure has the following data:
Q TC P

0 40 90

1 70 80

2 100 70

3 140 60

4 180 50

5 200 40

Required:

a) Calculate Total Revenue, Marginal Revenue, Marginal Cost, Fixed Cost, Profit levels at each level of
output. (3 marks)

b) Find the Profit Maximisation level of output, Price and Profit earned thereon. (2 marks)

(Total Marks: 15)

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