00% 11 09:5 Section B: Answer BOTH questions 21. Answer two of the following questions, (10 marks each) (a) Consider a f

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00 11 09 5 Section B Answer Both Questions 21 Answer Two Of The Following Questions 10 Marks Each A Consider A F 1 (131.24 KiB) Viewed 53 times

00% 11 09:5 Section B: Answer BOTH questions 21. Answer two of the following questions, (10 marks each) (a) Consider a firm that is particularly interested in estimates of elasticities. I discovers that its cross price elasticity of demand between good A, which it sells and good e, which another firm sells is 45.3. Its price elasticity of demand for good A is estimated as-2.5 and its income elasticity of demand is 42.5, while the price elasticity of supply is +0.3. Comment on the implication of these figures for the fiera. Discuss the Information that this provides to the firm and how it can use this to develop its product, pricing and overall strategy Answer: Marker Moderator (b) In the short run, why is it important for a firm to know its marginal product of labour or its marginal product to any of its variable inputs? Use a diagram to show how the firm can use this information to derive its production possibility curve. If we were to consider the firm operating in the long run, it might benefit or suffer from falling or rising long run average costs as it expands output. What terms would we use to describe this and what are some of the reasons why a firm might experience falling and rising average costs? Answer: Marker Moderator Calconi