(1) Suppose that the price of product A falls from $20 to
$15 In response, the quantity demanded of A increases from 100 to 120 units
The quantity demanded for product B increases from 200 to 300 Calculate the
arc cross elasticity between Product B and Product A Is B a substitute or
complement for A? Explain Does Product A follow the “law of demand’?
(2) Suppose that you can sell as much of a product as you
want at $100 per unit You marginal cost is MC = 2Q Your fixed cost is$50
What is the optimal output level? What is the optimal output, if your fixed
cost is $60?
(3) Suppose that the marginal product of labor is: MP = 100
– L, where L is the number of workers hired You can sell the product in the
marketplace for $50 per unit, and the wage rate for labor is $100 How many
workers should you hire?