1) Define the following terms:
a) Marginal Revenue (2 marks).
b) Marginal Cost (2 marks).
c) Average Cost (2 marks).
d) Average Revenue (2 marks).2) The table below gives information on the price and quantity of apples and oranges demanded in Year 1 and Year 2.
P Q P Q
Year 1 10 50 10 30
Year 2 5 60 20 10
Using the information in the table, calculate the following:a) The price elasticity of demand using either the % change method or the arc price elasticity of
demand for apples. [4 marks].b) Calculate the cross price elasticity for the change in quantity demanded of apples when the price
of oranges changes from year 1 to year 2. [4 marks].c) Comment on the cross price elasticity of demand for apples and oranges which you calculated the
value for in part b). [3 marks].
3) If a firm produces bicycles and it faces an increase in the price of raw materials used to make
bicycles, explain using appropriate diagrams the effect of the increase in the costs of production on
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