Unity University – College of Distance Education Mathematical Economics - 94

UNITY UNIVERSITY
COLLEGE OF DISTANCE AND CONTINUING EDUCATION
DEPARTMENT OF ECONOMICS

WORKSHEET for Mathematical Economics

94

Name: _________________________________________________________

ID No.________________________________________________________

Centre: ____________________ Semester ____________ Academic Year ___________

This is a test paper you are expected to do on your own. It carries 25 points. The test paper
should be completed and mailed to the School of Distance and Continuing Education for
evaluation. Do not try to complete the worksheet until you have covered all the lessons and
exercises in the course material.

Any questions in the course that you have not been able to understand should be stated on a
separate sheet of paper and attached to this worksheet. Your tutor will clarify them for you.

After completing this test paper, be certain to write your Name, Id No and Address on the first
page. Your Name and Id No on the other pages only.

Part I: Decide the following statements whether they are true or false. (0.5 pt each)
1. Economic functions of the polynomial form are always continuous.
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Unity University – College of Distance Education Mathematical Economics - 94

2. Though the right and left hand limits of a constant functions are not the same, the limit of
this function exists and it is equal to the function itself.
3. A function f(x) is continuous on a closed interval [a, b] if and only if it is continuous
between the interval a and b.
4. In constrained optimization a firm is indifferent to choose between any values of the
resources.
5. The concept of optimization is related more to the maximization of economic functions
than the minimization of them.
6. Matrix transposition is defined only for square matrix.
7. It is possible to add or subtract three or more matrices even though they may differ in their
dimensions.
8. In a production function of two inputs, we can say the production is in its efficient stage if
the first order partial derivative functions are both positive and the second order partial
derivatives are negatives.
9. Matrix multiplication is commutative except for an identity matrix.
10. A consumer’s surplus is the maximum price at which he or she would buy that good.

Part II: Choose the best answer and write the letter of your choice on
the space provided (1 pt each).
Suppose a company manufactures a mirror at a fixed cost of Birr 200 and total cost of birr
1700 at an output level of 250 mirrors per day. Assuming linear relationships, answer the
following questions.

1. The slope of the line joining the points associated with outputs (mirrors) of 100 and 200 is?

A) 6 B) -1.5 C) 3 D) none
2. Equation of the line relating output (Q) to cost(C) is

A) C=200-3Q B) C= 200+6Q C) C=200-1.5Q D) none

Suppose Agricultural Economics department in JUCAVM was opened in 1991 E.C with only
20 students. The college has planned to increase the number of students joining this
department by 5 students in each consecutive year which makes an arithmetic progression.
3 . What is the total number of students that have joined the department up to 2004 E.C?
A) 1700 B) 357 C) 755 D) 1750 E) none

Assume
2
the demand equation for a firm‟s product is given as Q=10-p and its cost function is
C=Q +0.5Q+1, then

4. The total profit (in thousands of dollar) that the firm gets at an output level of 2 units is?

A) 3 B) 19 C) 10 D) 22.5 E) none
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5. The level of output that makes the firm break-even is?

A) -2 units B) 17.5 units C) 4.7 units D) none

6. How much more does it cost the firm to produce 30 units than 20 units?

A) $916 B) $411 C) $505 D) $ 1327 E) none

Part III: short answer (1pt each)

1. Explain the difference between constrained and unconstrained optimization?
2. In constrained optimization what does (lambda) the Lagrange multiplier imply?
3. Explain what consumer surplus and producer surplus mean?

Part IV: Workout the following

1. A monopolist sells two products x and y for which the demand functions are x=25-0.5pxand
2 2
y= 30-p y and cost function is C=x +2xy+y +20, where P x and P y are price of product X and
price of product Y respectively. Then compute the following. (3 pts)
a) Profit maximizing level of each product.
b) Profit maximizing price for each product.
2. Find the consumer’s surplus at a price level of birr 5 for the demand equation p=40-Q and
show it graphically. (3 pts)

st
3. A consumer has birr 1000 to spend on two commodities, the 1 of which costs birr 13 per
unit and the second one costs 10 per unit. Suppose the utility of the consumer is
0.4 0.6
U(x,y)=2x y . How many units of each commodity should the consumer buy to maximize
utility? (3 pts)

4. The firm‟s extra cost for producing one additional pair of shoe is given by
C (Q) = , where Q is the number of pairs of shoes produced. If the fixed cost of
the firm is birr 50,000, then estimate the total cost function of the firm. (2 pts)

2 2
5. The monthly profits of an organization is given by П(N,T)=8N+3T+NT-2N -3T -200,
Where N is the number of workers and T is the number of times the firm advertises its
products. Then how many workers and how many times the organization should hire and
should advertise in order to maximize its profit? (2 pts)

Answer sheet for Part I Part II: Multiple Choices

1. _______ 6. _______ 1. ________

2. _______ 7. _______ 2. ________
3. _______ 8. _______ 3. ________
4. _______ 9. _______ 4. ________
5. _______ 10. _______ 5. ________

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6. ________