CEMBA/CEMPA

CLASS EXERCISE
TIME ALLOWED: 1 HR
 QUESTION 1
A firm incurs a fixed production cost of
GH¢1280 and a variable cost of GH¢80
per unit of output. Its demand function
is Q
P  100 
20
where P = price and Q = quantity.
a) Write down an equation for the total cost.
b) Express revenue as a function of Q.
c) Express profit as a function of Q.
 QUESTION 2
Solve the following equation for x using
indices.

x2 2 x
5  125
 QUESTION 3
Each lorry working for a haulage firm drives between 30,000
and 45,000 miles a year. The company fits a statistical model
to relate the miles travelled by each of its lorries last year to
the revenue earned by each. They obtained the relationship

R  0.05m  6m  100
2

where R is revenue (GH¢1000) and m is miles (1000s).

a) How much revenue would you expect a lorry doing 40,000 miles in
a year to earn?
b) How many miles a year must a lorry drive to earn revenue of GH
¢35,000 a year.
 QUESTION 4
A firm has the supply equation as
1
Q   P  20
2
and the demand equation as
3
Q  P  10
2
where P = price and Q = quantity demanded.
Determine the equilibrium price (P) and
quantity (Q).