REVIEW QUESTIONS

1. Given the total revenue (TR) and total cost (TC) functions:

Calculate the following:

a. Total revenue (TR) at Q = 5.

b. Total cost (TC) at Q = 5.
c. Profit (π) at Q = 5.
d. Total fixed cost (TFC).
e. Average revenue (AR) at Q = 5.
2. Given the total revenue (TR) and total cost (TC) functions of a firm as follows:

𝑇𝑅 = 132𝑄 − 8𝑄 2

𝑇𝐶 = 𝑄 3 − 14𝑄 2 + 69𝑄 + 128

Calculate the following:

a. The quantity (Q) at which profit is maximized.

b. The total revenue (TR) at the profit-maximizing quantity.

c. The total cost (TC) at the profit-maximizing quantity.

d. The profit (𝜋π) at the profit-maximizing quantity.

e. The total fixed cost (TFC).

f. The total variable cost (TVC) at the profit-maximizing quantity.

g. The average fixed cost (AFC) at the profit-maximizing quantity.

h. The average variable cost (AVC) at the profit-maximizing quantity.

i. The average revenue (AR) at the profit-maximizing quantity.

 j. The type of market this firm operates in based on the provided functions.

3. (a) What are the demand schedule and the demand curve, and how are they related? Why
does the demand curve slope downward? Use graphs to illustrate your answers. Explain
your answers using examples, graphs and descriptions.
(b) Does a change in consumers’ tastes lead to a movement along the demand curve or to
a shift in the demand curve? Does a change in price lead to a movement along the demand
curve or to a shift in the demand curve? Explain your answers using examples, graphs and
descriptions.
© Harry’s income declines, and as a result, he buys more pumpkin juice. Is pumpkin juice
an inferior or a normal good? What happens to Harry’s demand curve for pumpkin juice?
Explain your answers using examples, graphs and descriptions.
4. (a) What are the supply schedule and the supply curve, and how are they related? Why does
the supply curve slope upward?
(b) Does a change in producers’ technology lead to a movement along the supply curve or
to a shift in the supply curve? Does a change in price lead to a movement along the supply
curve or to a shift in the supply curve? In both cases Explain your answers using examples,
graphs and descriptions.
© Beer and pizza are complements because they are often enjoyed together. When the price
of beer rises, what happens to the supply, demand, quantity supplied, quantity demanded,
and price in the market for pizza?
5. Suppose that the price of basketball tickets at Moshi Cooperative University (MoCU)
stadium is determined by market forces. Currently, the demand and supply schedules are
as follows:
Price in Tshs Qs Qd
4 10,000 8,000
8 8,000 8,000
12 6,000 8,000
16 4,000 8,000
20 2,000 8,000
(a) Draw the demand and supply curves. What is unusual about this supply curve? Why
might this be true?
(b) What are the equilibrium price and quantity of tickets?
 (c) Your college plans to increase total enrollment next year by 5,000 students. The
additional students will have the following demand schedule:

Price in Tshs Qd
4 4,000
8 3,000
12 2,000
16 1,000
20 0

Now add the old demand schedule and the demand schedule for the new students to calculate the
new demand schedule for the entire college. What will be the new equilibrium price and quantity?

6. Fill in the Blank with the correct word in the following statements
i) Costs of production that are not borne by persons or entities directly involved in the
production are known as _________________________ costs.
ii) Annika opens a riding stable. She factors in the cost of buying horses, buying riding
tackle, and renting space. However, she does not consider the opportunity cost of her
time. Annika is considering only the _________________________ costs of her
project.
iii) A cost that can be easily adjusted is known as a(n) ________________________ cost.
iv) An equation or graph that shows the relationship between types or quantities of inputs
and quantity of the output is known as a(n) _________________________.
v) In the short run, a factor that creates a constraint to increasing production is known as
a(n) _________________________ factor.

(B) Write TRUE for correct statements and FALSE for incorrect statements

i) In production theory, the term "average product" refers to the additional output
produced by employing one more unit of a specific input while keeping other inputs
constant.
ii) Diseconomies of scale occur when a firm experience increasing average total revenues
as its level of production increases.
iii) The production function represents the technological relationship between inputs and
outputs, indicating the maximum output that can be produced with given inputs.
 iv) The concept of the short run-in production theory implies that all inputs are variable,
and a firm can change its scale of operations.
v) A firm's production decisions are influenced not only by cost considerations but also
by revenue, market conditions, and technological advancements.
(C) Suppose you are the manager of a small manufacturing company that produces custom-
made furniture. The production process involves various costs, and you need to analyze the
cost structure for the current month. Below is a table with some missing values. Your task
is to fill in the blanks based on the given information.

Output Total Total Total cost Average Average

fixed average fixed cost variable
cost cost cost
0 3000 0
1 3000
2 6000
3 9000
4 12000
5 15000

7. With examples, differentiate the following economic terms:

i) Normal goods and inferior goods
ii) Complementary goods and substitute goods
iii) Monopoly markets and oligopoly markets
iv) Consumer behavior and producer behavior
v) Capitalist economy and socialist economy

8. Describe precisely some of the trade-offs faced by each of the following:

i) a family deciding whether to buy a new car
ii) a member of Congress deciding how much to spend on national parks
iii) a company president deciding whether to open a new factory
iv) a professor deciding how much to prepare for class
v) a recent college graduate deciding whether to go to graduate school
9. With graphical illustration, explain the concept of circular flow of income
10. With the aid of diagram, differentiate the following concepts:
(i) Indifference curve vs indifference map
(ii) Budget line vs budget constraint
(iii) Total utility vs marginal utility
(iv) Optimal consumption bundle vs non optimal consumption bundle
(v) Law of diminishing marginal utility vs law of diminishing marginal product

11. Imagine you are a consumer who has a monthly budget for two goods: Good X and Good
Y. The price of Good X is TZS 5 per unit, and the price of Good Y is TZS 8 per unit. Your
monthly budget is TZS 200.
(i) Draw the initial budget line on a graph with Good X on the horizontal axis and Good
Y on the vertical axis and label the intercepts. (2.5 marks)
(ii) Find the slope of this budget line. (2.5 marks)
(iii)Calculate the quantity of Good X that can be bought when the entire budget is spent on
Good X. (2.5 marks)
(iv) Calculate the quantity of Good Y that can be bought when the entire budget is spent on
Good Y. (2.5marks)