ECO404 Assignment
ECO404 Assignment
Question: 01 (Marks: 5)
A firm pays Rs. 450,000 in wages, Rs. 66,430 in interest on borrowed money capital and Rs. 89,320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most Rs. 58,400 per year and if he lent out his money capital to somebody else in a similarly risky business, he would at most receive Rs. 28,500 per year. He owns no land or building. Keeping in view the above information,
Calculate the:
a) Explicit cost of the entrepreneur
b) Implicit cost of the entrepreneur
Question: 02 (Marks: 5)
Given the following equations of total revenue and total cost: TR = 250Q – 5Q2 TC = 100 + 50Q Find out the level of output at which profit is maximized (by using marginal revenue and marginal cost approach).
Question: 03 (Marks: 5)
You have given the following information: Estimated regression line: Y = 0.55 + 9.25X Standard error = 0.75 Degree of freedom = 8 Level of significance = 5% Tabulated value of t = 2.306 Calculate the confidence interval from this information.
A firm pays Rs. 450,000 in wages, Rs. 66,430 in interest on borrowed money capital and Rs. 89,320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most Rs. 58,400 per year and if he lent out his money capital to somebody else in a similarly risky business, he would at most receive Rs. 28,500 per year. He owns no land or building. Keeping in view the above information,
Calculate the:
a) Explicit cost of the entrepreneur
b) Implicit cost of the entrepreneur
Question: 02 (Marks: 5)
Given the following equations of total revenue and total cost: TR = 250Q – 5Q2 TC = 100 + 50Q Find out the level of output at which profit is maximized (by using marginal revenue and marginal cost approach).
Question: 03 (Marks: 5)
You have given the following information: Estimated regression line: Y = 0.55 + 9.25X Standard error = 0.75 Degree of freedom = 8 Level of significance = 5% Tabulated value of t = 2.306 Calculate the confidence interval from this information.
=**Fairy** = Monstars
 Posts : 585
Join date : 20110411
Re: ECO404 Assignment
Question # 1:
A firm pays Rs. 450,000 in wages, Rs. 66,430 in interest on borrowed money capital and Rs. 89,320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most Rs. 58,400 per year and if he lent out his money capital to somebody else in a similarly risky business, he would at most receive Rs. 28,500 per year. He owns no land or building. Keeping in view the above information, calculate the:
a) Explicit cost of the entrepreneur
b) Implicit cost of the entrepreneur
Solution:
a)Explicit cost the entrepreneur
Explicit cost = wages + interest+ rent
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= 450,000 + 66,430 + 89,320
= Rs. 605,750
Implicit cost = entrepreneur forgone salary
= Rs. 28,500
Question # 2:
Given the following equations of total revenue and total cost:
TR =250Q – 5Q2
TC = 100 + 50Q
Find out the level of output at which profit is maximized (by using marginal
revenue and marginal cost approach).
Solution:
According to necessary condition of equilibrium
MC=MR ………..(1)
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MC= taking derivative of TC
MC= d (TC) dQ MC= d (100+50Q) dQ
MC= 50 ………..(2)
Now
MR= taking derivative of TR
MR = d (TR) dQ MR = d (250Q  5Q2) dQ
MR= 250 10Q ………(3)
Put the values of equ (2) & (3) in equ (1)
50=250 – 10Q
OR
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250 – 10Q = 50
 10Q = 50 250
 10Q =  200
Q = 200 10 Q = 20
Now Tp= TR – TC
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p= 250Q – 5Q2– 100 – 50Q
p= 200Q – 5Q2– 100 ……..(4)
Put the value of Q in (4)
p= 200(20) – 5(20)2 – 100
= 4000 2000 – 100
Tp= 1900
So profit is maximized where output is 20 and maximum profit is 1900
[You must be registered and logged in to see this image.]
A firm pays Rs. 450,000 in wages, Rs. 66,430 in interest on borrowed money capital and Rs. 89,320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most Rs. 58,400 per year and if he lent out his money capital to somebody else in a similarly risky business, he would at most receive Rs. 28,500 per year. He owns no land or building. Keeping in view the above information, calculate the:
a) Explicit cost of the entrepreneur
b) Implicit cost of the entrepreneur
Solution:
a)Explicit cost the entrepreneur
Explicit cost = wages + interest+ rent
[You must be registered and logged in to see this image.]
= 450,000 + 66,430 + 89,320
= Rs. 605,750
Implicit cost = entrepreneur forgone salary
= Rs. 28,500
Question # 2:
Given the following equations of total revenue and total cost:
TR =250Q – 5Q2
TC = 100 + 50Q
Find out the level of output at which profit is maximized (by using marginal
revenue and marginal cost approach).
Solution:
According to necessary condition of equilibrium
MC=MR ………..(1)
[You must be registered and logged in to see this image.]
MC= taking derivative of TC
MC= d (TC) dQ MC= d (100+50Q) dQ
MC= 50 ………..(2)
Now
MR= taking derivative of TR
MR = d (TR) dQ MR = d (250Q  5Q2) dQ
MR= 250 10Q ………(3)
Put the values of equ (2) & (3) in equ (1)
50=250 – 10Q
OR
[You must be registered and logged in to see this image.]
250 – 10Q = 50
 10Q = 50 250
 10Q =  200
Q = 200 10 Q = 20
Now Tp= TR – TC
[You must be registered and logged in to see this image.]
p= 250Q – 5Q2– 100 – 50Q
p= 200Q – 5Q2– 100 ……..(4)
Put the value of Q in (4)
p= 200(20) – 5(20)2 – 100
= 4000 2000 – 100
Tp= 1900
So profit is maximized where output is 20 and maximum profit is 1900
[You must be registered and logged in to see this image.]
=**Fairy** = Monstars
 Posts : 585
Join date : 20110411
Re: ECO404 Assignment
Very Well Done [You must be registered and logged in to see this image.]
kamran Monstars

Posts : 301
Join date : 20110211
Age : 30
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