QUESTION 4 [27 MARKS]
4.1 Consider the production function: Y= -X3+ 2X2 + 3X
a) Derive marginal physical product and average physical product equations when Py R3 and Px = R1
b) What will be the level of X where average physical product reaches its maximum? Show all your calculations.
c) Calculate the elasticity of production when the level of X is 2 and interpret your
answer.
4.2 State and explain the three (3) determinants of market demand for labour.
4.3 Use graphs to differentiate the economic profit and normal profit of the firms under
perfect competition.
4.4 Copy and complete the table below. Show all your formulas.
Output Total Total
Marginal
Average
Average
Average
(units) cost
fixed
cost
fixed cost
variable
total cost
(R)
cost (R)
(R)
(R)
cost
(R)
(R)
0
7000
5000
10
11000
5000
20
14000 5000
»
30
17000 5000
40
20000 5000
50
25000
5000