SOLUTIONS TO ALL 40 SUMS (with the corrections to the sums):

1. The demand curve for a commodity is p = 36 2d2. The average cost curve is given
as c = 15d. Find TR, AR, AFC, AVC, TC, MC
1. = =

2. = : =

3. = : =

= = = and AFC = 0

(This sums solution was corrected by Sonia Jain)

2. The demand curve for a commodity is p = 50 4d. Find edp when demand is 5. Find
edp when price is 6. Find consumers surplus at price 6

1. =

Elasticity of demand

2. = = . .

3. = = . . () = . . =
.
4. ;= = . = = .

Consumers Surplus
Price T
E
A=6

B = 11 Qty

5. ( ) = ()() =

6. ( )() = = () () = =

7. = =

1
3. The demand curve for a commodity is p = 10 5d. The average cost is c = 3. Find
the TC, MC, TR, MR. Find consumers surplus at price 2. Find consumers surplus
when the demand is 1.

1. = =
2. = : =
3. = : =

Consumers Surplus at P = 2
Price T
E
A=2

B = 1.6 Qty
4. =
5. = ; = ; = .
6. ( ) = ()(. ) = .
.
7. ( )() = . = (. ) . (. ) = .
8. = . . = .

Consumers Surplus at D = 1
Price T
E
A=5

B=1 Qty
9. =
10. = ; = () ; =
11. ( ) = ()() =
.
12. ( )() = . = () . () = .
13. = . = .

2
4. The total cost function is C = 2q 2q2 + q3. Find the minimum AC and verify that at
optimum output AC = MC.
1. : = +
2. : = +
3. : = +
4. : = + = ; =
5. (=) : = () + () =
6. (=) : = () + () =
7. , , =

5. The total output varies with the use of labour according to the function which is given
to be Q = 10 + 12L L2. Find the average product and marginal product of labour.
1. = +

2. = +

3. = =

(This sums solution was corrected by Sonia Jain, I had wrongly stated Per Comp instead of Mon Comp, step 2)
6. Given C = x3/3 3x2 + 9x + 16 and R = 21x x2, does the producer sell in a
monopolistic or a competitive market ? Find the output for maximum revenue. What
is the maximum value of R?

1. = + +

2. = This TR function shows that the market type is Monopolistically

Competitive

3. = =

4. = = . At q = 10.5, the TR (or Sales) is maximized

5. () = (. ) (. ) = . . = .

3
7. Find the optimum level of production of a firm whose total revenue and marginal cost
functions are given as follows: R = 30x x2 and C = 20 + 4x. C(0) = 4. Find the price
that this firm can charge when the production is at the optimum size. Also find the
Full-Cost price as well as the MC Price that could be charged. (Note: x is the level of output).

1. : = +

2. : = + + () =

3. : = + +

4. : = =; = ; = = .

5. : =

6. : =

7. =. = . = .

8. : = + +

9. : =

10. : + =

()() ()() . .
11. = = = = = = .
()

12. : = . = .

13. : = +

14. : =

15. : =

16. : = =

4
8. The demand function is given to be p = 90 1/5d. Find the level of output for which
MR will be zero. What will be the price of this output ? Find consumers surplus
when the price is 7.

1. : = ; = .

2. : = .
3. : = .
4. . = ; =
5. = : = . () = =

Consumers Surplus at P = 7
Price T
E
A=7

B = 415 Qty
6. = . ; , = . ; =
7. ( ) = ()() =

8. ( . )() = . = () . () =
. = .
9. = . = .

(This sums solution was corrected by Dalreen Ramos, I had made a mistake in step 2)
9. If the total cost function is C = 20 + 2q2 20q, at output 25, find the following for this
firm c, C, AFC, AVC.
1. : = +
2. = = + () () =

3. : = +


4. = = + () = .

5. = =

6. = = =


7. = = = . = () =

5
 (This sums solution was corrected by Riddhi Kamdar, I had made a mistake in Step 15)
10) For a monopolist firm, the cost function is C = 0.004x3 - 20x + 1000 and the demand
function for this firm is p = 450 4x. Find optimum output for this firm. Find the profit
maximization output, price and value of the profit; find edp at price 20 (Note: x = quantity).

1. = 1 a. = . +

2. = 2 a. : = . +

3. = 3 a. = .

4. = .


5. . =

6. . =

7. = =
.

8. = =

9. = . +
10. = . +
11. = . +
12. . + =
() (.)() +. . .
13. = = = = =
(.) . . .

.
14. = (. ) = . = . 470
15. = . (. ) (. ) + (. )
16. = . . + . = .
17. = becomes = . .
12086.5
18. = . . () ; = .

19. = (. ) ( ) = . = .
.

6
 (This sums solution was corrected by Nishita Shah, I had wrongly used the demand function as the AR function)
11) If the monopolist faces a demand curve d = 20 p/3, at what level would his total
revenue be maximum ? What would be the price of this output level ? Find out the value
of total revenue for this output level.

1. = and so : =

2. : =
3. : =
4. = ; =
5. =. = () = =
6. =. = () () = =

12. Given p = 30 5d, find the elasticity of demand when p = 5. Also find the edp when
d = 4. Also find the consumers surplus at price 4.

1. : = ; = .
2. = = . () =
3. = ; = = .

4. = . = .

5. = = () =
6. = ; = = .

7. = . = .

Consumers Surplus at P = 4
Price T
E
A=4

B = 5.2 Qty
8. = ; , = ; = .
9. ( ) = ()(. ) = .
.
10. ( )() = . = (. ) . (. ) =
. = .
11. = . . = .

7
 13) If AR = 20, the elasticity of demand with reference to price is 2. Find MR and
comment on it. Does the consumer enjoy any surplus at price 2 ?

1. = formula

2. = from given and 1

3. = from 2

4. = from 3

5. = from 4

6. The MR (= 10) < the AR (= 20)

Cannot comment on the consumers surplus, since neither is the cost

nor the Willing Price of the consumer given.

(This sums solution was corrected by Utkarsha Deosthali, Step 5, the uncoloured part of the sentence)
14. The demand function faced by a firm is p = 500 0.25x and its cost function is given to
be C = x2 + 25x + 100. Find the output when AC = MC. Show that at this output AC is at
its minimum. (note x = quantity). Find the price levels for the profit-maximizer, the sales
maximizer, the Full-Cost pricing strategist (assume the firm is welfare-oriented), the MC
pricing strategist.

1. : = + + and : = .
2. : = + and : = .

3. : = + + and : = .


4. : = =; = at x = 10, AC = MC


+ = + + ; = + ; , =

5. (=) = + + = Hence the minimal AC is Rs 45
6. , (=) = + + =
7. , (=) = + + =
8. Thus only at qty = 10 units (where AC = MC) is the value of AC the least.

Note: Sum 14 is continued on page 9

8
For profit maximization:

9. = .

10. = . +

11. = . + = ; , = ( )
12. = . < ,

13. = = . () = . = .

For Sales maximization:

14. . = ; , = ( )
15. = = . () = =

For Full Cost Pricing:

16. : = ; + + = .

17. + + = . ; . + =
()() (.)()
18. = = = =
(.) . .

=
.

19. : = . () = =

For Marginal Cost Pricing:

20. : = ; + = .
21. : . = ; = .
22. : . (. ) = .

9
15. Given the demand curve p = 10 4d, find the TR and MR of this firm. What is the
demand when MR is zero? Find consumers surplus when price is 2.
1. : =

2. : =

3. : =

4. = ; = .

Consumers Surplus at P = 2
Price T
E
A=2

B=2 Qty
5. = ; , = ; =
6. ( ) = ()() =

7. ( )() = = () () = =
= =

16. Given p = 16 d2/2, find the TR function, MR function, R(1), R(5). At what demand
would MR be zero ? Find consumers surplus at price 1.5

1. : =


2. : =

3. : = .
4. = = . () = . = .
5. = = . () = . = .
6. = : . = ; . = ; = . ; = .
7. = ; = .

10
 Consumers Surplus at P = 1.5
Price T
E
A = 1.5

B = 5.39 Qty

8. . = ; , . = ; = .

9. ( ) = (. )(. ) = .
.
10. (
) () = . = (. ) . (. ) =
. . = .
11. = . . = .
17. If the demand curve for sugar is p = 8 d, find the respective price elasticity of
demand at P = 1 and P = 3. Also find the consumers surplus at d = 2.
1. =
Elasticity of demand at p = 1
2. =
3. = = =

4. ;= = = = .

Elasticity of demand at p = 3
5. =
6. = = =

7. ;= = = = .

Consumers Surplus at d = 2 thus, 2 = 8 p; so p = 6
Price T
E
A=6

B=2 Qty
11B2
8. ( ) = ()() =

9. ( )() = = () = =

10. = =

11
 18. Show that edp is always 1 for the demand curve (d)(p) = alpha, where alpha is
a constant.
1. = given

2. = from 1

()
3. = differentiating 2 , wrt p
()
()
4. = formula
()

5. = ( ) putting 2 and 3 in 4


6. = () ( ) from 5

7. = from 6

19. Compute income elasticity of demand from the following demand function:
D = 20 + 0.05Y for Y = 4, Y = 16 and Y = 100.
1. = + .
Elasticity of demand at Y = 4
2. = = + . () = .
.
3. ;= = +. =+ = .
. .
Elasticity of demand at Y = 16
4. = = + . () = .
.
5. ;= = +. =+ = .
. .
Elasticity of demand at Y = 100
6. = = + . () =

7. ;= = +. = + = .

20. A firm has a total cost function C = (1/10)(x3) 3x2 + 50x + 100. Find this firms
AC, AVC, AFC and MC.

1. : = + +


2. = + +


3. = + =


4. : =

12
 21. The firm sells its product in a competitive market and the fixed market price is Rs
100/3 per unit of x. Is it possible to find this firms maximum total revenue?

1. = ; = ; = , = =

2. .
3. , .

22. Find the optimum output of a firm whose TR and TC are given as R = 30x x2
and C = 20 + 4x2. Find the value of the MR at the optimum output. Find the output
at which sales is maximized and find the value of the maximum sales. Find the
value of the maximum profits that can be earned.
1. : = + and : =
2. : = + and : =

3. : = + and : =


4. , = : + = +

5. + = +
6. + = ; , + =
() ()() + .
7. = = = = = .
()

8. , .
9. =. = (. ) = .
10. = ; , = ( )
11. = () () = = .
For profit maximization:
12. =
13. = +
14. = + = ; , = ( )
15. = < ,
16. = = ()() + () =

13
23. The demand curve is p = 12 3x. The average cost is c = 2x2. Find the firms TR,
TC, MC, MR at price 6 and cost Rs10
1. : = and : =

2. : = and : =
3. : = and : =
4. = ; =
5. = = () () =
6. = = () =
7. = ; = ; = = .

8. = = (. ) = .
9. = = (. ) = .

(This sums solution was corrected by Utkarsha Deosthali, Step 5, and step 9)

24. The total cost function is C = 15x 6x2 + x3, where x is output and C is the total
cost of output. Find the AC function and MC function. At what output is AC
minimum ? What is the minimum AC ? At what output is MC minimum ? What is
the minimum MC ? At what output are average and marginal costs equal ?
1. : = +
2. : = +
3. : = +
4. : = + ; = , =
5. ( ) = () + ()() =

6. : , > =
7. : = + = ; = , = ,
8. = , > =
9. ( ) = () + ()() = ;

25. The average cost curve of a good is given to be c = 1 + 120x3 6x2, where x is
output. Find minimum AC. Verify that minimum AC is equal to MC
1. : = +
2. : = +
3. : = +
4. : =

5. = ; , = = .

6. (=.) = + (. ) (. )
7. (=.) = + . . = .
8. (=.) = + (. ) (. ) = .
9. , = .

14
26. The employment of a man-hours on b acres of land gives a wheat cultivating
farmer q = 2(12ab 5a2 + 4b2) bushels of wheat. Find the AP and MP curves for
labour and land.
1. = +

2. = +


3. = +


4. =


5. =

27. Find the marginal product and the average product of L and K when we are given
L = 2 and K = 4 for the following function : q = 4L2 + 15LK + K2.
1. = + +
()
2. = + = () () +
= + =
()()
3. = + = () + =


4. = = + = () + () =


5. = = + = () + () =

28. Find the MPL and MPK for the following production function: x = 1.01L0.75C0.25,
where x is total putout, L is labour and C is capital.
1. = . . .

2. = = (. )(. )(. )(. ) = . ( ).

. .
3. = = (. )( )(. )( )= . ( ).

29. Find the MPL and MPK for the following production function: x = L0.42C0.58, where
x is total putout, L is labour and C is capital.
1. = . .

2. = = ()(. )(. )(. ) = . ( ).

. . )
3. = = ()( )(. )( = . ( ).

15
 30. If the cost function is C = 5x2 + 2x + 10, find the value of the total cost at optimum
output.
1. : = + +

2. : = + +

3. : = +

4. = = ; = ; = = .

5. (=. ) = (. ) + (. ) +
6. (=. ) = . + . + = .

31. Given the following demand functions for two separate markets and the total cost
function of the monopoly firm, what will be the prices, output and MRs in the two markets
and the monopolists total profits under: (i) price discrimination; (ii) sales maximization.
p1 17 + 2q1 = 0; p2 25 + 3q2 = 0 and C = 2 + q1 + q2
1. 1 = 17 21 and so 1 = 171 212 hence 1 = 17 41
2. 2 = 25 32 and so 2 = 252 322 hence 2 = 25 62
3. (1 + 2 ) = = 171 212 + 252 322
4. = = 171 212 + 252 322 2 1 2
5. = 161 212 + 242 322 2
Price Discrimination, via profit max

6. = 16 41 = 0 and so 1 = 4 hence 1 = 17 2(4) = 9
1

7. = 24 62 = 0 and so 2 = 4 hence 2 = 25 3(4) = 13
2

8. = 16(4) 2(16) + 24(4) 2(16) 2

9. = 64 32 + 96 32 2 = 94
Sales Maximization
10. 17 41 = 0 and so 1 = 4.25 hence 1 = 17 2(4.25) = 8.5
11. 25 62 = 0 and so 2 = 4.17 hence 2 = 25 3(4.17) = 12.49
12. = 16(4.25) 2(18.06) + 24(4.17) 3(17.39) 2
13. = 25.5 36.12 + 100.08 52.17 2 = 35.29

16
32. Given the following demand functions for two separate markets and the total cost
function of the monopoly firm, what will be the prices, output and MRs in the two markets
and the monopolists total profits under: (i) price discrimination; (ii) sales maximization.
Also calculate the elasticities of demand in Market 1 and Market 2
p1 2 + q1 = 0; p2 9 + 6q2 = 0 and C = q1 + q2

1. 1 = 2 1 and so 1 = 21 12 hence 1 = 2 21
2. 2 = 9 62 and so 2 = 92 622 hence 2 = 9 122
3. (1 + 2 ) = = 21 12 + 92 622
4. = = 21 12 + 92 622 1 2
5. = 1 12 + 82 622
a. Price Discrimination, via profit max

6. = 1 21 = 0 and so 1 = 0.5 hence 1 = 2 (0.5) = 1.5
1

7. 2
= 8 122 = 0 and so 2 = 0.67 hence 2 = 9 6(0.67) = 4.98

8. = 1(0.5) 1(0.25) + 8(0.67) 6(0.45)

9. = 0.5 0.25 + 5.36 2.7 = 2.91
b. Sales Maximization
10. 2 21 = 0 and so 1 = 1 hence 1 = 2 1(1) = 1
11. 9 122 = 0 and so 2 = 0.75 hence 2 = 9 6(0.75) = 4.5
12. = 1(1) 1(1) + 8(0.75) 6(0.56)
13. = 1 1 + 6 3.36 = 2.64
c. Elasticities
1.5
14. 1 = 2 1 ; 1 =1.5 = 2 1.5 = 0.5; = 1 0.5 = 3
4.98
15. 2 = 1.5 0.172 ; 2 =4.98 = 1.5 (0.17)(4.98) = 0.65; = 0.17 0.65 = 1.31

33. Given the following demand functions for two separate markets and the total cost
function of the monopoly firm, what will be the prices, output and MRs in the two
markets and the monopolists total profits under: (i) price discrimination; (ii) sales
maximization.
Also prove that (a) equality of MRs in the two markets does not necessarily imply the
equality of prices in the two markets of a discriminating monopoly; (b) price will be
more in a less elastic market than in a more elastic market.
p1 = 12 - q1; p2 = 20 - 3q2 and C = 3 + 2(q1 + q2)
Hint: e = A / (A M) can be transposed into M = A(1 1/e)

17
 Solution for sum no. 33

1. 1 = 12 1 and so 1 = 121 12 hence 1 = 12 21

2. 2 = 20 32 and so 2 = 202 322 hence 2 = 20 62
3. (1 + 2 ) = = 121 12 + 202 322
4. = = 121 12 + 202 322 3 21 22
5. = 101 12 + 182 322 3
a. Price Discrimination, via profit max

6. = 10 21 = 0 and so 1 = 5 hence 1 = 12 1(5) = 7
1

7. = 18 62 = 0 and so 2 = 3 hence 2 = 20 3(3) = 11
2

8. = 10(5) 1(25) + 18(3) 3(9) 3

9. = 50 25 + 54 27 = 52
a. Sales Maximization
10. 12 21 = 0 and so 1 = 6 hence 1 = 12 1(6) = 6
11. 20 62 = 0 and so 2 = 3.3 hence 2 = 20 3(3.3) = 10.1
12. = 10(6) 1(36) + 18(3.3) 3(10.89)
13. = 60 36 + 59.4 32.67 = 50.73
14. (1 =5 ) = 12 2(5) = 2
15. (2 =3 ) = 20 6(3) = 2
16. , (= 2), : 7 & 11
7
17. 1 = 12 1 ; 1 =7 = 12 7 = 5; = 1 5 = 1.4
11
18. 2 = 6.67 0.32 ; 2 =11 = 6.67 0.3(11) = 3.37; = 0.3 3.37 = 0.98

7 7 11 11
1 = = 72 = = 1.4 and 2 = = 112 = = 1.2
5 9

19. = 1.4, 7 = 0.98 ( 1.2), 11

20. ,

(Note: the elasticities for market 2 are different for each formula used in step 18, due to the
decimalized numbers involved in the first method and whole numbers in the second method;
in either ways, edp1 > edp2).

18
 34) Given the following demand functions for two separate markets and the total cost
function of the monopoly firm, what will be the prices, output and MRs in the two
markets and the monopolists total profits under:
(i) price discrimination; (ii) sales maximization.
p1 80 + 5q1 = 0; p2 = 180 - 20q2 = 0 and C = 50 + 20(q1 + q2)
Solution:
1. 1 = 80 51 and so 1 = 801 512 hence 1 = 80 101
2. 2 = 180 202 and so 2 = 1802 2022 hence 2 = 180 202
3. (1 + 2 ) = = 801 512 + 1802 2022
4. = = 801 512 + 1802 2022 50 201 202
5. = 601 512 + 1602 2022 50
a. Price Discrimination, via profit max

6. = 60 101 = 0 and so 1 = 6 hence 1 = 80 5(6) = 50
1

7. = 160 402 = 0 and so 2 = 4 hence 2 = 180 20(4) = 100
2

8. = 60(6) 5(36) + 160(4) 20(16) 50

9. = 360 180 + 640 320 50 = 450
a. Sales Maximization
10. 80 101 = 0 and so 1 = 8 hence 1 = 80 5(8) = 40
11. 180 202 = 0 and so 2 = 9 hence 2 = 180 20(9) =
12. = 60(8) 5(64) + 160(9) 20(81) 50
13. = 480 320 + 1440 1620 50 = 70

It follows that this firm should not indulge in sales max as an objective, but stick to being a
price discriminator and enjoy max super normal profits

19
35. Given the following demand functions for two separate markets and the total cost
function of the monopoly firm, what will be the prices, output and MRs in the two
markets and the monopolists total profits under: (i) price discrimination; (ii) sales
maximization. 5p1 550 + 75q1 = 0; 0.1p2 = 8 0.3q2 = 0 and C = 80 + 20(q1 + q2)

1. 1 = 110 151 and so 1 = 1101 1512 hence 1 = 110 301

2. 2 = 80 32 and so 2 = 802 322 hence 2 = 80 62
3. (1 + 2 ) = = 1101 1512 + 802 322
4. = = 1101 1512 + 802 322 80 201 202
5. = 901 1512 + 602 322 80
a. Price Discrimination, via profit max

6. = 90 301 = 0 and so 1 = 3 hence 1 = 110 15(3) = 65
1

7. = 60 62 = 0 and so 2 = 10 hence 2 = 80 3(10) = 50
2

8. = 90(3) 15(9) + 60(10) 3(100) 80

9. = 270 135 + 600 300 80 = 355
a. Sales Maximization
10. 110 301 = 0 and so 1 = 3.67 hence 1 = 110 15(3.67) = 54.95
11. 80 62 = 0 and so 2 = 13.3 hence 2 = 80 3(13.3) = 40.1
12. = 90(3.67) 15(13.47) + 60(13.3) 3(176.89) 80
13. = 330.3 202.05 + 798 530.67 80 = 315.58
14. 1 = 110 301 ; = 110 30(3) = 20
& max = 110 30(3.67) = 0 ()
15. 2 = 80 62 ; = 80 6(10) = 20
& max = 80 6(13.3) = 0 ()

20
36. A firm under imperfect competition faces a demand function: p = 16 - 2q and a
cost function: C = 2 + 8q. Find:
(a) its maximum profits;
(b) its monopoly power with reference to its MR at profit max qty;
(c) its monopoly power with reference to its MC (ie., Lerners formula)
at profit max qty.

1. = 1 a. = +

2. = 2 a. : = +

3. = 3 a. =
4. = = +
5. = +
6. = Necessary Condition for profit max, 3, 3a
7. =
8. = () = from 1 and 7
9. = () + () = ( ) from 5 & 7
10. = , = () =
11. = , = () =
12. = , =
()
13. =
=
= . %
()
14. =
=
= . %

15. Hence, Mon Power, whether measured wrt to MR or MC at profit max

equilibrium, will give the same result.

21
37. A firm under imperfect competition faces a demand function: p = 32 - 3q and a cost
function: C = 5 + 8q + q2. Find: (a) its maximum profits; (b) its monopoly power with
reference to its MR; (c) its monopoly with reference to its MC (ie., Lerners formula).
1. = 1 a. = + +

2. = 2 a. : = + +

3. = 3 a. = +
4. =
5. = +
6. = + Necessary Condition for profit max, 3, 3a
7. =
8. = () = from 1 and 7
9. = () + () = ( ) from 5 & 7
10. = , = () =
11. = , = () =
12. = , = + () =
13. = ()

=


= %

14. = ()

=


= %

15. Hence, Mon Power, whether measured wrt to MR or MC at profit max equilibrium, will
give the same result.

22
38. Identify (via justification) the objective and subjective demand curves for a firm (under
monopolistic competition) from the following demand functions:
p1 = 50 - 0.8q1 and p2 = 55 1.7q2
Now if the cost function facing this firm is: C = 5 + 8q + q2 (where q = q1 +q2), find the
maximum profit that this firm can enjoy, given its market determined point of
operations.

1. 1 = 50 0.81 and 2 = 55 1.72

:
Argument 1
2.
, tan
3. 1 = 0.8 and 2 = 1.7
4. ,
5. , 2 = 55 1.72
Argument 2 (actually a corollary of Argument 1)
6. ,
.
7. , 2 = 55 1.72
Argument 3
8. 1 = 62.5 1.251 and 2 = 32.4 0.592
9. 1 = 2 = 1, 1 = 61.25 2 = 31.81
1 1
10. , 1 = 1.25 61.25 = 0.020 and 2 = 0.59 31.81 = 0.018

11. |1 |> |2 |, ,

; 2 = 55 1.72

12. ( ) &

13. ( ), 1 = 2 = 1 = 2 =

14. 50 0.8 = 55 1.7; , = 5.56

15. = 50 0.8(5.56) = 45.55

16. 50(5.56) 0.8(5.56)(5.56) = 278 24.73 = 253.27

17. 5 + 8(5.56) + (5.56)(5.56) = 5 + 44.48 + 30.91 = 80.39

18. 253.27 80.39 = 172.88

23
 39. Identify (via justification) the objective and subjective demand curves for a firm (under
monopolistic competition) from the following demand functions:
q1 = [(17 - p1) / 0.3] and q2 = [(40 p2) / 1.3]. Now if the cost function facing this firm
is: C = 15 + 4q + q2 (where q = q1 +q2), find the profit that this firm can enjoy, given
its market determined point of operations.
17 1 40 2
1. 1 = and 2 = so : 1 = 17 0.31 2 = 40 1.31
0.3 1.3
:
Argument 1
2.
, tan
3. 1 = 0.3 and 2 = 1.3
4. ,
5. , 2 = 40 1.32
Argument 2 (actually a corollary of Argument 1)
6. ,
.
7. , 2 = 40 1.32
Argument 3
8. 1 = 56.67 3.31 and 2 = 30.76 0.772
9. 1 = 2 = 1, 1 = 53.37 2 = 30
1 1
10. , 1 = 3.3 53.37 = 0.062 and 2 = 0.77 30 = 0.026

11. |1 |> |2 |, ,
; 2 = 40 1.32
12. ( ) &
13. ( ), 1 = 2 = 1 = 2 =
14. 17 0.3 = 40 1.3; , = 23
15. = 17 0.3(23) = 10.1
16. 17(23) 0.3(23)(23) = 391 158.7 = 232.3
17. 15 + 4(23) + (23)(23) = 15 + 92 + 529 = 636
18. 232.23 636 = 403.77

24
 (This sums solution was corrected by Lewin Mathews and Vanessa Alvares, I had wrongly used 11 instead of 1.1)
(Please note I have corrected the solutions of sums 41 to 44 also)
40. Find the % changes in price and quantity when demand increases and supply
decreases. The involved (shuffled) DD and SS functions are pd1 = 65 0.7qd1, ps1 =
15 + 0.4qs1, pd2 = 75 0.7qd2, ps2 = 8 + 0.4qs2.

Price

Qty

Note: In the case of such a problem, we have to first decide which of the demand or supply
curves are the original ones and which are the new ones.

We are told that demand increases and so in this case, the demand curve shifts
PARALLELLY to the RIGHT, hence, the 1 for the two curves will remain the same (= -0.7)
in this sum, but the 0 will change with new demand curve having a higher 0 than the original
one. Thus pd1 = 65 0.7qd1 will be the original demand curve and pd2 = 75 0.7qd2 the
new demand curve.
Again, we are told that supply decreases and so in this case, the supply curve shifts
PARALLELLY to the UPWARDS, hence, the 1for the two curves will remain the same
(= + 0.4) in this sum, but the 0 will change with new supply curve having a higher 0 than the
original one. Thus ps2 = 8 + 0.4qs2 will be the original supply curve and ps1 = 15 + 0.4qs1
the new supply curve.
Working with original data we get:
, . = + . ; , . = ; , = .
= . (. ) = .
Working with new data we get:
, . = + . ; , . = ; , = .
= . (. ) = .
.
= . %
.
.
And = . %
.

Prices have risen by a higher proportion than qty.

25
 41. Find the % changes in price and quantity when demand is unchanged and supply
decreases. The involved (shuffled) demand and supply functions are
ps1 = 15 + 0.4qs1, pd2 = 75 0.7qd2, ps2 = 8 + 0.4qs2.

Price

Qty

Note: In the case of such a problem, we have to first decide which of the supply curves is
the original one and which is the new one.

We are told that demand remains the same throughout, so we have only one demand
curve pd2 = 75 0.7qd2.
Again, we are told that supply decreases and so in this case, the supply curve shifts
PARALLELLY to the UPWARDS, hence, the 1for the two curves will remain the same
(= + 0.4) in this sum, but the 0 will change with new supply curve having a higher 0 than the
original one. Thus ps2 = 8 + 0.4qs2 will be the original supply curve and ps1 = 15 + 0.4qs1
the new supply curve.
Working with original supply and the fixed demand equations we get:
, . = + . ; , . = ; , = .
= . (. ) = .
Working with new supply and the fixed demand equations we get:
, . = + . ; , . = ; , = .
= . (. ) = .
.
= . %
.
.
And = . %
.

Prices have fallen by a greater proportion than fall in qty.

26
 42. Find the % changes in price and quantity when demand increases and supply is
unchanged. The involved (shuffled) demand and supply functions are
pd1 = 65 0.7qd1, ps1 = 15 + 0.4qs1, pd2 = 75 0.7qd2.

Price

Qty

Note: In the case of such a problem, we have to first decide which of the demand curves is
the original one and which is the new one.

We are told that demand increases and so in this case, the demand curve shifts
PARALLELLY to the RIGHT, hence, the 1 for the two curves will remain the same (= -0.7)
in this sum, but the 0 will change with new demand curve having a higher 0 than the original
one. Thus pd1 = 65 0.7qd1 will be the original demand curve and pd2 = 75 0.7qd2 the
new demand curve.
Again, we are told that supply curve is unchanged and so is ps1 = 15 + 0.4qs1.
Working with original data we get:
, . = + . ; , . = ; , = .
= . (. ) = .
Working with new data we get:
, . = + . ; , . = ; , = .
= . (. ) = .
.
= % ()
.
.
And = %()
.

Qty has risen by a higher proportion than the rise in price.

27
43. Find the % changes in price and quantity when demand decreases and supply
decreases. The involved (shuffled) demand and supply functions are p d1 = 105
0.7qd1, ps1 = 15 + 0.4qs1, pd2 = 75 0.7qd2, ps2 = 21 + 0.4qs2.

Price

Qty
Note: In the case of such a problem, we have to first decide which of the demand or
supply curves are the original ones and which are the new ones.
We are told that demand decreases and so in this case, the demand curve shifts
PARALLELLY to the LEFT, hence, the 1 for the two curves will remain the same
(= -0.7) in this sum, but the 0 will change with new demand curve having a lower 0 than
the original one. Thus pd1 = 105 0.7qd1 will be the original demand curve and
pd2 = 75 0.7qd2 the new demand curve.
Again, we are told that supply decreases and so in this case, the supply curve shifts
PARALLELLY to the UPWARDS, hence, the 1for the two curves will remain the same
(= + 0.4) in this sum, but the 0 will change with new supply curve having a higher 0 than
the original one. Thus ps1 = 15 + 0.4qs1 will be the original supply curve and ps2 = 21 +
0.4qs2 the new supply curve.
Working with original data we get:
, . = + . ; , . = ; , = .
= . (. ) = .
Working with new data we get:
, . = + . ; , . = ; , = .
= . (. ) = .
.
= % ()
.
.
And = . %
.

Prices have fallen by a lesser proportion than qty.

28
44. Find the % changes in price and quantity when demand increases and supply
decreases. The involved (shuffled) demand and supply functions are:
pd1 = 105 0.7qd1, ps1 = 15 + 0.4qs1, pd2 = 75 0.7qd2, ps2 = 21 + 0.4qs2.

Price

Qty
Note: In the case of such a problem, we have to first decide which of the demand or
supply curves are the original ones and which are the new ones.
We are told that demand increases and so in this case, the demand curve shifts
PARALLELLY to the RIGHT, hence, the 1 for the two curves will remain the same
(= -0.7) in this sum, but the 0 will change with new demand curve having a lower 0 than
the original one. Thus pd2 = 75 0.7qd2 will be the original demand curve and
pd1 = 105 0.7qd1 the new demand curve.
Again, we are told that supply decreases and so in this case, the supply curve shifts
PARALLELLY to the UPWARDS, hence, the 1for the two curves will remain the same
(= + 0.4) in this sum, but the 0 will change with new supply curve having a higher 0 than
the original one. Thus ps1 = 15 + 0.4qs1 will be the original supply curve and ps2 = 21 +
0.4qs2 the new supply curve.
Working with original data we get:
, . = + . ; , . = ; , = .
= . (. ) = .
Working with new data we get:
, . = + . ; , . = ; , = .
= . (. ) = .
.
= % ()
.
.
And = % ()
.

Prices have risen by nearly the proportion as qty.

29
45. Find the respective consumers and producers surplus at equilibrium, from the
following demand and supply functions: pd = 105 0.6qd, ps = 15 + 0.4qs

Price T
S
E
A = 51
M
D

B = 90 Qty

1. = . and = + .
2. , . = + . ; =
= . () =
3. ( ) = ()() =

4. ( . )() = . = () . () =
=
5. = =

6. ( + . )() = + . = () + . () =
+ =
7. = =

46. Find the respective consumers and producers surplus at equilibrium, from the
following demand and supply functions:
0.1pd - 10.5 + 0.06qd = 0 and 0.05ps - 0.75 - 0.01qs = 0 Price
S
E
A = 60
M
D

1. = . and = + . B = 75 Qty
2. , . = + . ; =
= . () =
3. ( ) = ()() =

4. ( . )() = . = () . () =
=
5. = =
. )() = + . = () + . () =
( +
6.
+ . = .
7. = . = .

30
47. Find the respective consumers and producers surplus at equilibrium, from the
following demand and supply functions: pd = 105 0.6qd, ps = 15 + 0.4qs. Now if the
market operates at an under-equilibrium point which is 10 units short of the
equilibrium quantity, calculate the total overall dead weight loss to the entire market.

Price
S
K E
A = 51 D
M

C=80 B = 90 Qty

1. = . and = + .
2. , . = + . ; =
a. = . () =
3. ( ) = ()() =

4. ( . )() = . = () . () =
=
5. = =

6. ( + . )() = + . = () + . () = +
=
7. = =

8. ( + . )() = + . = [() + . ()]
[() + . ()] = [ + ] [ + ] =
=
9. ( ) = ()() =
10. = =

31
 48. Find the respective consumers and producers surplus at equilibrium, from the
following demand and supply functions:
0.1pd - 10.5 + 0.06qd = 0 and 0.05ps - 0.75 - 0.01qs = 0
Now if the market operates at an under-equilibrium point which is 25 % short of the
equilibrium quantity, calculate the total overall dead weight loss to the entire market.

Price
S
K E
A = 60 D
M

C=56.25 B = 75 Qty

1. = . and = + .
2. , . = + . ; =
= . () =
3. ( ) = ()() =

4. ( . )() = . = () . () =
=
5. = =
. )() = + . = () + . () =
( +
6.
+ . = .
7. = . = .
8. (. )() = .

9. .( + . )() = + . = [() + . ()]
[(. ) + . (. )] = [ + . ] [. + . ] =
. . = .
10. ( ) = ()(. ) =
11. = . = .

32
49. Find the respective consumers and producers surplus at equilibrium, from the
following demand and supply functions: pd = 105 0.6qd, ps = 15 + 0.4qs. Now if the
market operates at an under-equilibrium point which is 10 units short of the
equilibrium quantity, calculate the dead weight loss to both the consumers and the
suppliers respectively. Sorry!! This sum is the same as Sum No. 47. But for
practice, let the company produce at 18 units (or any number between 0 and 90) less
than the equilibrium output if you do so, send me the answer.
50. Find the respective consumers and producers surplus at equilibrium, from the
following demand and supply functions:
0.1pd - 10.5 + 0.06qd = 0 and 0.05ps - 0.75 - 0.01qs = 0
Now if the market operates at an under-equilibrium point which is 25 % short of the
equilibrium quantity, calculate the dead weight loss to both the consumers and the
suppliers respectively. Sorry!! This sum is the same as Sum No. 48. But for practice,
let the company produce at 30 % (or any %) less than the equilibrium output if you
do so, send me the answer.

Real 49) If the total cost function of a perfect competitive firm is given as:
= 0.1 3 2 2 + 15 + 10. Find its supply function and reservation price
1. : = . + +
2. = = . +
3. = . +
4. = . +
5. = . = for minima of AVC
6. =
7. , , (= ) = (= ) =
. ()() () + =
8. ,
= = = =
9.
10. = . +
()() (.)()
11. . + ( ) = ; , = (.)

.() +. .
12. = = =
. . .
.
13. , , .
.

Note: We have to work with the quadratic formula, since the supply function must
have q as the dependent variable, This is why Step 11 is involved.

33
 Real 50) If the total cost function of a perfect competitive firm is given as:
3
1. = 2 2 + 4 + 10. Find its supply function and reservation price
2

2. : = + +

3. = = . +

4. = +


5. = +

6. = = for minima of AVC
7. =
8. , , (= ) = (= ) =
()()
() + = + =

9. ,
a. = = = =
10.
11. = . +
()() (.)()
12. . + ( ) = ; , = (.)

() +
13. = = =


14. , , .

Note: We have to work with the quadratic formula, since the supply function must
have q as the dependent variable, This is why Step 11 is involved.

34