The document contains solutions to microeconomics problems involving demand and cost curves. It solves for the profit-maximizing level of output for a firm by setting marginal revenue equal to marginal cost. It also provides the demand, total cost, total revenue, marginal cost and marginal revenue for a firm producing 11 units of output. The curves are defined as P = 400 - 20Q, TC = 500 + 20Q^2, and TR = PQ.

1. NAME: ELIZABETH N WAWERU
REG NO: D33/OL/7397/2008
UNIT: EET 100
UNIT NAME: MICROECOMICS THEORY 1
DATE SUBMITTED: 24/MAY/2012

2. SOLUTIONS
a)TR=PG
P = (309.5 – Q) Q
TR= 309.5Q – Q2
TR =TC
309.5Q – Q2 = Q2 – 40Q + 400
309.5Q – 400 = 2Q + Q2 – 40Q
90.5 = 2Q + Q2– 40Q
Q2 – 38Q – 90.5
Q = 68.05 or 8.05
P= 309.5 – Q When Q = 68.05
P = 309.5 – 68.05
P = 241.45
When Q = 8.05
P = 309.5 – 8.05P = 301.45

3. b)ORDINAL APPROACH
Accordingly this approach, utility is not measureable. It is a mental phenomenon. Each
consumer keeps a number of pairs of two commodities in his mind (a scale of preferences)
which gives him equal, more or less satisfaction. So utility can be ranked qualitatively. That is
why this approach is known as “ordinal measurement of utility”. The axioms include;
The rational Consumer
The first assumption is that our consumer is a rational one. He is well aware of with the market
price, his income and his preferences. In this situation he wants to maximize his satisfaction.He
aims at maximizing his total satisfaction, given his income and prices of goods and services he consumes.
Furthermore, he has full knowledge of his choices and preferences.
Ranking Of The Utility
This theory stresses upon the ranking of the utility which means that the consumer expresses his
preferences for the bundle of two commodities which gives him equal, more or less satisfaction.
Two Commodities Model
This approach is based on two commodities model, i-e u = f(x , y).
Divisible Goods
This approach assumes that goods are completely divisible in to a small unit.
Preferences
Dispreferences
Axiom of Transitivity and Consistency
The consumer consistent in his decision. Consumer’s choices are transitive. Transitivity of choice
means that if a consumer prefers A to B and B to C, he must prefer A to C Or, if he treats A= B
and B=C, he must treat A =C, consistency of choice means that if he prefers A to B in one
period, he will not prefer B to A in another period or treat them as equal. The transitivity and
consistency in consumer’s choices may be symbolically expressed as follows
Transitivity: If A>B and B> C then A>C, and
Consistency: If A > B, in one period, then B > A or B = A in another.
Axiomof Dominance
This assumption states that a consumer prefers more to less. If bundle A has more of (x , y) then
bundle B. He will prefer A.

4. c)
Qty T.C T.R M.C M.R P
1. 520 380 40 360 380
2. 580 720 80 320 360
3. 680 1020 120 280 340
4. 820 1280 160 240 320
5. 1000 1500 200 200 300
6. 1220 1680 240 160 280
7. 1480 1820 280 120 260
8. 1780 1920 320 80 240
9. 2120 1980 360 40 220
10. 2500 2000 400 0 200
11. 2920 1980 440 –40 180
P = 400 – 20Q
TC = 500 + 20 Q2 TR = PQ
(400 – 20Q)Q
= 400Q – 20Q2
MR = δTR = 400 – 40Q
δQ
MC = δTC = 40Q
δQ

5. Equilibrium
MR = MC
400 – 40Q = 40Q
400 =80Q
80 80
Q=5
P = 400 – 20Q
= 400 – 20 (5)
P = 300