Semester spring 2011
Assignment no 02
ECO402
Total Marks: 15
Question no.1:
Suppose you are working in a mobile making firm operating in a perfectly
competitive market. Your cost of production is given by:
TC = 5000 + Q2
Where Q is the level of output and TC is total cost. The fixed cost of production is Rs.5000.
a. If the price of a mobile is Rs.7200, how many mobiles should you produce to
maximize profit?
b. What will your profit level be?
(Marks = 6 + 6)
Question no.02:
If a sales tax of Rs.50 per unit of output is placed on one firm whose product sells for Rs.500 in a competitive industry.
What will happen to price, output and profit? (Marks = 03)
Important Note:
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