List of top Economics Questions on Production and cost asked in GATE XH-C1

Suppose the demand for a new pharmaceutical drug, on which the manufacturer has a patent monopoly, is given by \( Q = (100 - P)A^{0.5 \), where \( Q \) is output, \( P \) is the price and \( A \) is advertising expenditure. Production cost of the patented drug is given by \( C(Q) = 60Q \). At the firm’s optimal choices, the ratio of advertising expenditure to sales revenue for the pharmaceutical product will be 1: _________ (in integer).}

A Government Security (G-Sec)

India has the highest amount of foreign debt in the form of

XYZ Co. Ltd. is a costless monopoly from suburban Mumbai producing and selling exotic mushrooms. The demand for mushrooms is given by \[ Q = 700 - 100P. \text{ Do you agree that XYZ will have a maximum possible total revenue of ₹1500?} \]

In a demand function estimation of a good X, a researcher collected data on various households’ consumption of good X (\( Q_x \)) for various price levels. The researcher also collected data on household income (\( M \)) and household size (\( S \)). The estimated regression result is \[ \log Q_x = -0.345(0.111) - 1.543(2.345) \log P_x + 1.123(0.012) \log M + 0.234(0.123) \log S, \] where \( P_x \) is price per unit of X. The values in the parentheses are the standard errors of the estimated coefficients. From the estimation, one can conclude that

For the production function \( Q = F(K, L) = \sqrt{KL} \) with \( P_K = 4 \) and \( P_L = 2 \), find the values of \( K \) and \( L \) that will minimize the cost of producing 2 units of output.