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Use economic reasoning to comment on the following statement: 'In a market where
products appear to be similar but significant quality and performance differences exist,
lack of information about product quality by some proportion of customers justifies
government intervention.'
Carefully define marginal rate of technical substitution. What are the assumptions on
the basis of which it is calculated?
Why is communication an important factor in competitive situations?
A firm has carefully estimated its production function to be: Q = K.55L.45. What is
output elasticity in this case? What sort of returns to scale does the firm face? Explain.
Sales at a store are currently $450,000 per year. If sales are predicted to increase by 5%
per year, forecast sales for each of the next 4 years.
For the Cobb-Douglass production function: Q = cLαKβderive the marginal rate of
technical substitution?
