Homework2 - Homework 2 ECO 303 Spring 2008 Multiple Choices...

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Homework 2 Name: ______________________ ECO 303 Spring 2008 ID: _________________________ Multiple Choices (30pt) 1. Suppose every unit of output requires two units of labor (L) or four units of capital (K). The production function for this process is a) Q = 0.5L+0.25K b) Q = 2L+4K c) Q = min(2L,4K) d) Q = min(0.5L, 0.25K) Use the following graph to answer question 2 and 3 2. Marginal product reaches a maximum when labor equals a) 200 b) 400 c) 600 d) 800 3. Average product reaches a maximum when labor equals a) 400 b) 600 c) 800 d) 1000 4. With a linear production function, the MRTS L, K a) declines as the firm substitutes labor for capital. b) remains constant as the firm substitutes labor for capital. c) implies upward-sloping, straight-line isoquants. d) is undefined. Page 1/1
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5. Suppose over time that a firm’s production process incurs capital-saving technological progress. This implies a) the isoquants corresponding to any particular level of output will shift outward from the origin and the MRTS L, K along any ray from the origin will increase. b) the isoquants corresponding to any particular level of output will shift outward from the origin and the MRTS L, K along any ray from the origin will decrease. c) the isoquants corresponding to any particular level of output will shift inward toward the origin and the MRTS L, K along any ray from the origin will increase.
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Homework2 - Homework 2 ECO 303 Spring 2008 Multiple Choices...

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