This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: MidTerm ll Name: 22452121214 %
ECO 303 Spring 2008 ID: Multiple Choices(30pt)
Idenaﬁ the choice that best completes the statement or answers the question. M/Dk/ M/Z / 1. Suppose over time that a ﬁrm’s production process incurs laborsaving M/K 7 M/L
technological progress. This implies a
a) the isoquants corresponding to any particular level of output will shift inward , WI: toward the origin and the MRTSL K along any ray from the origin will' 1ncrease. & b M/L 7 M /<
) the isoquants corresponding to any particular level of output will shift outward
from the origin and the MRTSL, K along any ray from the origin will decrease =? MK 73' ,p/ﬂ/‘S/
the isoquants corresponding to any particular level of output will shift inward
toward the origin and the MRTSL K along any ray from the origin will decrease. d) the isoquants corresponding to any particular level of output will shift outward
from the origin and the MRTSL K along any ray from the origin will increase. 2. If the production function is Q=K+2L, then the elasticity of substitution is Dmer; ’— < 0
a) negative. //7l€ﬂ/L, 3 4
.approaching inﬁnity.
c) zero.
d) one. 3. With a CobbDouglas production function, the MRTSL K
a) is undeﬁned. b) implies upwardsloping, straightline isoquants.
c) remains constant as the ﬁrm substitutes labor for capital. . ”declines as the ﬁrm substitutes labor for capital. _, E {Q
4. Suppose the output elasticity of total cost is 2. This implies the average cost curve 0( L exhibits M C ‘——> = — : a) increasing returns to scale. 2 )1’ C é ”7C .—: Z/f'C b) economies of scale. 9/}7C 7/4 C c neither economies nor diseconomies of scale. _ . . —) p. 6, S 0d15econom1es of scale. 5. Consider the production function Q=( L”: +K’”) . J’This production function exhibits 2 4); Jik‘b sz 1“] @$(7[_) :ékj :j: a) decreasing returns to scale. ,4
aonstant returns to scale. ~— "> (k 3+ 4 H/
c increasing returns to scale.
(1) either decreasing or constant returns to scale, but more information is needed to
determine which one. 6. isquant curve represents a) ll combinations of inputs in which the ﬁrm produces the same level of output. ”x— b) all combinations of inputs in which the ﬁrm has the same level of total cost.
c) for a given level of output, the various points that will produce that same level of output at the same cost. d) Both a) and b) are true. True/False (30pt) ,
Indicate whether the statement is true or false. Explain why if your answer is false 7. l0. Minimum efﬁcient scale is the highest level of output the ﬁrm can achieve. Fa/S’e/ fa #2 Whiﬁ'mﬂ,’ The slope of the isocost line equals the ratio of the marginal productivities of the inputs. // (A?
. — . ’7 IZD‘C’ ”MFA
m/K If average cost increases as output we have diseconomies of scale and decreasing return to scale. / ? ' 7%»: gAm/o/ 407% a» planar»: A high elasticity of substitution between capital and labor implies that labor
demand will be more price elastic. T 11. In the short run, marginal cost can be measured as the tangent slope of the total
cost curve plus the tangent slope of the shortrun variable cost curve.
F ad’rc a!“ affc .9er
//”C:yf 2¢5t342+r47 12. Given a production function Q=F(K,L). When the price of K increases, to V
produce the same amounts of output, the costminimizing quantity of K must decrease.  a F / {3C M Pﬁévdﬁg’h 74117017371 (T Zen772%,
frpolayﬁc'm, W 742 the—mN/Aéw'y ZJHMV?’ lam/(II m 2* 6407/? ,
Questions(40pt) 13. Suppose a ﬁrm has a production function Q=2KL+L, a) what is the marginal rate of technical substitution (MRTS)? (3pt) k
7N
Q
\\ ll b) Does the firm have increasing return to scale? (3pt) c2”: >(ek)(>4)+»4 = oa/a H4
>4? = >(>k¢+4):¢£/.+>>4 CP/> 2/4? =? .Z/f’J‘ c) At ﬁrst, the ﬁrm used 3 units of capital and 2 units of labor. Now, the ﬁrm
wants to use only 1 unit of capital to produce the same amounts of output. What is thekelagicity of sgbsguulgon? (4pt) A (é) _,
(9/ 0—9 / 44 T
a, ) and ¢; L
L amen“
[44 22!. +L — 3 ”7/63
(54 _‘£. — g
: _. 2
ﬂ : '2 £0
g .1
4—“..2:
.2. 14. Suppose that a ﬁrm’s production function is given by QszKM. The price of
labor (L), capital (K) and Material (M) are w=4, r=I, and m=1, respectively. a) If the ﬁrm wants to produce 324 units of output in the long run, what is the
solution to the ﬁrm’s long run cost minimization problem (the optimal basket)? am ”1‘: _ mag _m/’m
N ' /’ "ﬂ M 9‘ = / = /
k=2L , M:/<
92F; "(z/_)(2/.) :4Léﬁ b) If the ﬁrm wants to produce 324 units of output, what is the solution to the
ﬁrm's shot run cost minimization problem when M=4 (the optimal basket)? (5pt) ,
?>}‘=4‘4 k /_= 5/? 8/:4’k
— )M
:zL
f]: 3L3
ﬂ 3L3
2
4 15. Suppose that a ﬁrm’s production function is given by Q = min (L, 2K),
w = $10 and r = $5. If the ﬁrm wants to produce 1,000 units of output, a) What is the most efﬁcient combination of labor and capital (L, K)? (Spt) [.r—lwv
>k=m>0 ? kw” =>>/<=z_ b) Suppose that the firm spends exactly $1200 in the most efﬁcient way possible.
How much outputs can the ﬁrm produce? (Spt) TC:J'k+/0 [__ IW=Ik+WK
9’ V?” :g
k=¥g
443.2:fé 49=7é¢ 16. Suppose a ﬁrm’s shortrun total cost curve can be expressed as
TC(Q)=50Q2+12Q+10. a) What is the ﬁxed cost? (2pt) JFC = /o b) What is the average cost‘?(2pt) fiC': .454) +/z+—’q)i c) What is the average variable cost? (3pt) n 3
Art/c: @f/lﬂ :4—007‘42, d) What is the marginal cost? (3pt) NC 3 “04? +/2 5 ...
View
Full Document
 Spring '08
 YunShanChan
 Microeconomics

Click to edit the document details