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Hcob2505:Production Economics Question Paper

Hcob2505:Production Economics

Course:Bachelor Of Commerce

Institution: Meru University Of Science And Technology question papers

Exam Year:2013

QUESTION ONE (30 MARKS)
a) Distinguish between the following concepts i. Ridge lines and isoclines. (4 Marks) ii. Economies of scale and economies of scope. (4 Marks) iii. Learning curve effect and cost complementarities. (4 Marks) iv. Marginal cost and average cost (4 Marks) b) Assume the firm has the following total revenue and total cost functions; = 320 22 = 1800 50 + 32
Determine the level of output the firm will be maximize profits. (5 Marks)
c) Given the following production function = 1500.750.25. Determine the elasticity of output with respect to (i) labour (ii) capital. Give an economic interpretation of these output elasticities. (5 Marks) d) Distinguish between simple and complex division of labour. (4 Marks)
QUESTION TWO (20 MARKS)
a) Given the following = 1000.50.5 = 1200 = 30
2
= 40 Determine the quantity of labour and capital that the firm should use in order to maximize output. What is the output level? (10 Marks) b) Clearly discuss the stages of the law of variable proportions. (use a diagram) (10 Marks)
QUESTION THREE (20 MARKS)
a) A biscuit producing company has the following variable cost function; (10 Marks) = 200 + 92 + 0.253 If the company fixed costs are 150 kshs. i. Total cost function ii. Marginal cost function iii. Average variable cost function iv. Average total cost function v. At what output levels average variable cost and marginal cost will be minimum. b) Given the following Cobb-Douglas production function = 1800.80.4. Determine; i. Average product of labour (2 Marks) ii. Average product of capital (2 Marks) iii. Marginal rate of technical substitution. (4 Marks) iv. What is the returns to scale? (2 Marks)
QUESTION FOUR (20 MARKS)
a) Suppose cocacola estimates that sales of its drink is a function of the amounts of advertising expenditure in two different media, television and newspaper. If X stands for advertisement expenditure in ksh. on television and Y stands for expenditure in kshs. on advertisement in newspaper. Sales of cocacola is given by; = 200 + 100 102 202 + 20 Assume that advertising budget is restricted to 20 ksh: then + = 20 i. Find the amount of expenditure incurred on television and newspaper advertising separately to maximize sales subject to the budget constraint. (6 Marks) ii. Calculate the sales of the firm at this constraint optimum level. (3 Marks) b) With the aid of diagrams explain the three types of returns to scale. (9 Marks)
QUESTION FIVE (20 MARKS)
c) Define an isoquant and explain the various types of isoquants. (5 Marks) d) Discuss the causes of internal economies of scale. (5 Marks) e) Explain the causes of diminishing marginal returns to a factor (5 Marks) f) Explain the factors affecting the mobility of labour. (5 Marks)

Hcob2505:Production Economics Question Paper

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