Economics – Other

(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’?

Explain

(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?