Lecture 3: Practice Questions

3.1 For each of the following functions, find

a) z = 5x4 − y2
b) z = x 2 + 2xy + y 2
c) z = 3x2 + 2x2 y + y 2 + y
d) z = x2 + 5xy + 4y 2
e) z = x3 + 3x2 − 2xy − xy 2 + 3y 2 + x2 y

3.2 y = 2x 2 + 5; and x increases from 4 to 4.01. Evaluate an approximate change in y using

differential method. What is the different between approximate change and the actual change?

3.3 Suppose the initial values of . Given that , evaluate an

approximate change in y if x1 increases by 2% and x2 increases by 1%.

3.4 A production function can be described as follows:

Q = 2LK + L

Given that the current levels of K and L are 7 and 4 respectively;

a) evaluate the marginal product of capital (MPK) and the marginal product of labour (MPL)
b) Write down the value of MRTS.

3.5 Suppose the production function of a firm is given by:

1 2

Q = 15K L3 3

where Q is monthly output and K and L are monthly inputs of capital and labour respectively.

a) Evaluate Q when K = 27 and L = 8.

b) Use the differential dQ to approximate the percentage change in Q when L and K
increase by 1% each.
3.6 A cost function is given as follows:

C = 400Q − Q2 + 0.5Q3 +100

Currently, the firm is producing 10 units of product. Use the differential of cost to approximate
the change in cost when output level of the product increases by 1% from the current level.

3.7 A cost function for production of two products is given as follows:

Currently, the firm is producing 10 units of product A and 15 units of product B and planning to
increase the production of A by 1%. Use the differential of cost to approximate the percentage
change in the level of output of B such that cost of production is maintained at the current level.
(Hint: you need to set dC=0 and find dQB and calculate the % change.)