Group assignment

1. Briefly explain the following concepts (1 points for each)

a. consumer preferences
b. law of diminishing marginal utility
c. Utility
2. explain the basic difference between cardinal and ordinal approaches of utility (1
points)
3. Given utility function U=x025 y0.75 where Px =2 birr, Py=4 and the income of the
consumer is M=240 birr
A) Find the utility maximizing combination of x and y (1 point)
B) Calculate marginal rate of substitution of X for Y (MRSx,y) at equilibrium and
interpret your result (1 point)

4. Consider the following short run production function Q=12L2 – 0.8L3

a) Find the value of L that maximized output (1 point)

b) Find the value of L that maximizes marginal products (1 point)

c) Find the value of L that maximize average product (1 point)

5. Given a short run cost function as TC=4Q2 +120Q, Find the minimum value of AVC and
MC (2 points)