Differential Equations in Economics

Description: This quiz covers the application of differential equations in economic modeling.
Number of Questions: 14
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Tags: economics differential equations economic models
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In a simple economic model, the demand for a product is given by the differential equation (\frac{dQ}{dt} = -aQ + bP), where (Q) is the quantity demanded, (P) is the price, (a) and (b) are positive constants. What is the equilibrium price?

  1. $\frac{b}{a}$

  2. $\frac{a}{b}$

  3. $\frac{a+b}{2}$

  4. $\frac{a-b}{2}$


Correct Option: A
Explanation:

The equilibrium price is the price at which the quantity demanded equals the quantity supplied. In this case, the quantity supplied is constant, so the equilibrium price is the price that makes the quantity demanded equal to the constant quantity supplied.

A company's total revenue is given by the function (R(Q) = pQ - \frac{1}{2}Q^2), where (Q) is the quantity produced and (p) is the price per unit. The marginal revenue is given by the derivative of the total revenue function. What is the marginal revenue when (Q = 10) units?

  1. $10

  2. $5

  3. $15

  4. $20


Correct Option: C
Explanation:

The marginal revenue is the derivative of the total revenue function. So, (MR = \frac{dR}{dQ} = p - Q). When (Q = 10), (MR = p - 10). Since the price is not given in the question, we cannot find the exact value of the marginal revenue.

A population grows according to the differential equation (\frac{dP}{dt} = 0.5P), where (P) is the population size. If the initial population size is 100, what will be the population size after 10 years?

  1. 150

  2. 200

  3. 250

  4. 300


Correct Option: D
Explanation:

To find the population size after 10 years, we need to solve the differential equation. The solution is (P(t) = P_0e^{kt}), where (P_0) is the initial population size, (k) is the growth rate, and (t) is the time. In this case, (P_0 = 100) and (k = 0.5). So, after 10 years, the population size will be (P(10) = 100e^{0.5 * 10} = 300).

In a predator-prey model, the population of predators is given by the differential equation (\frac{dP}{dt} = 0.5P - 0.2PQ), where (P) is the population of predators and (Q) is the population of prey. The population of prey is given by the differential equation (\frac{dQ}{dt} = -0.3Q + 0.1PQ). What is the equilibrium point of this system?

  1. (100, 200)

  2. (150, 300)

  3. (200, 400)

  4. (250, 500)


Correct Option: C
Explanation:

To find the equilibrium point, we need to solve the system of differential equations. The equilibrium point is the point where the population sizes of both predators and prey are constant. In this case, the equilibrium point is ((P, Q) = (200, 400)).

A company's cost function is given by the function (C(Q) = 0.5Q^2 + 2Q + 10), where (Q) is the quantity produced. The average cost is given by the function (AC(Q) = \frac{C(Q)}{Q}). What is the average cost when (Q = 10) units?

  1. $3.50

  2. $4.00

  3. $4.50

  4. $5.00


Correct Option: C
Explanation:

The average cost is given by the function (AC(Q) = \frac{C(Q)}{Q}). When (Q = 10), (AC(10) = \frac{C(10)}{10} = \frac{0.5(10)^2 + 2(10) + 10}{10} = 4.50).

In a simple economic model, the supply of a product is given by the differential equation (\frac{dQ}{dt} = aP - bQ), where (Q) is the quantity supplied, (P) is the price, (a) and (b) are positive constants. What is the equilibrium quantity?

  1. $\frac{a}{b}$

  2. $\frac{b}{a}$

  3. $\frac{a+b}{2}$

  4. $\frac{a-b}{2}$


Correct Option: A
Explanation:

The equilibrium quantity is the quantity at which the quantity supplied equals the quantity demanded. In this case, the quantity demanded is constant, so the equilibrium quantity is the quantity that makes the quantity supplied equal to the constant quantity demanded.

A company's total cost function is given by the function (C(Q) = 0.25Q^3 + 1.5Q^2 + 4Q + 10), where (Q) is the quantity produced. The marginal cost is given by the derivative of the total cost function. What is the marginal cost when (Q = 10) units?

  1. $10.75

  2. $11.25

  3. $11.75

  4. $12.25


Correct Option: C
Explanation:

The marginal cost is the derivative of the total cost function. So, (MC = \frac{dC}{dQ} = 0.75Q^2 + 3Q + 4). When (Q = 10), (MC = 0.75(10)^2 + 3(10) + 4 = 11.75).

A population grows according to the differential equation (\frac{dP}{dt} = -0.2P), where (P) is the population size. If the initial population size is 100, what will be the population size after 10 years?

  1. 50

  2. 25

  3. 12.5

  4. 6.25


Correct Option: D
Explanation:

To find the population size after 10 years, we need to solve the differential equation. The solution is (P(t) = P_0e^{kt}), where (P_0) is the initial population size, (k) is the growth rate, and (t) is the time. In this case, (P_0 = 100) and (k = -0.2). So, after 10 years, the population size will be (P(10) = 100e^{-0.2 * 10} = 6.25).

In a predator-prey model, the population of predators is given by the differential equation (\frac{dP}{dt} = -0.3P + 0.1PQ), where (P) is the population of predators and (Q) is the population of prey. The population of prey is given by the differential equation (\frac{dQ}{dt} = 0.2Q - 0.05PQ). What is the equilibrium point of this system?

  1. (100, 200)

  2. (150, 300)

  3. (200, 400)

  4. (250, 500)


Correct Option: C
Explanation:

To find the equilibrium point, we need to solve the system of differential equations. The equilibrium point is the point where the population sizes of both predators and prey are constant. In this case, the equilibrium point is ((P, Q) = (200, 400)).

A company's revenue function is given by the function (R(Q) = 10Q - 0.5Q^2), where (Q) is the quantity sold. The marginal revenue is given by the derivative of the revenue function. What is the marginal revenue when (Q = 10) units?

  1. $5

  2. $10

  3. $15

  4. $20


Correct Option: A
Explanation:

The marginal revenue is the derivative of the revenue function. So, (MR = \frac{dR}{dQ} = 10 - Q). When (Q = 10), (MR = 10 - 10 = 0).

In a simple economic model, the demand for a product is given by the differential equation (\frac{dQ}{dt} = -2Q + 10P), where (Q) is the quantity demanded, (P) is the price, and (a) and (b) are positive constants. What is the equilibrium price?

  1. $5

  2. $10

  3. $15

  4. $20


Correct Option: A
Explanation:

The equilibrium price is the price at which the quantity demanded equals the quantity supplied. In this case, the quantity supplied is constant, so the equilibrium price is the price that makes the quantity demanded equal to the constant quantity supplied.

A company's total cost function is given by the function (C(Q) = 0.1Q^3 + 0.5Q^2 + 2Q + 10), where (Q) is the quantity produced. The average cost is given by the function (AC(Q) = \frac{C(Q)}{Q}). What is the average cost when (Q = 10) units?

  1. $3.60

  2. $4.10

  3. $4.60

  4. $5.10


Correct Option: C
Explanation:

The average cost is given by the function (AC(Q) = \frac{C(Q)}{Q}). When (Q = 10), (AC(10) = \frac{C(10)}{10} = \frac{0.1(10)^3 + 0.5(10)^2 + 2(10) + 10}{10} = 4.60).

A population grows according to the differential equation (\frac{dP}{dt} = 0.4P), where (P) is the population size. If the initial population size is 100, what will be the population size after 10 years?

  1. 140

  2. 180

  3. 220

  4. 260


Correct Option: D
Explanation:

To find the population size after 10 years, we need to solve the differential equation. The solution is (P(t) = P_0e^{kt}), where (P_0) is the initial population size, (k) is the growth rate, and (t) is the time. In this case, (P_0 = 100) and (k = 0.4). So, after 10 years, the population size will be (P(10) = 100e^{0.4 * 10} = 260).

In a predator-prey model, the population of predators is given by the differential equation (\frac{dP}{dt} = 0.2P - 0.1PQ), where (P) is the population of predators and (Q) is the population of prey. The population of prey is given by the differential equation (\frac{dQ}{dt} = -0.3Q + 0.2PQ). What is the equilibrium point of this system?

  1. (100, 200)

  2. (150, 300)

  3. (200, 400)

  4. (250, 500)


Correct Option: C
Explanation:

To find the equilibrium point, we need to solve the system of differential equations. The equilibrium point is the point where the population sizes of both predators and prey are constant. In this case, the equilibrium point is ((P, Q) = (200, 400)).

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