practicequestions2spring2005

practicequestions2spring2005 - Economics 302 Spring 2005...

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Economics 302 Spring 2005 Practice Questions for Chapter 3 Multiple Choice Questions for a Quick Review: 1. A competitive firm a. Is a price taker in both the output and the product markets. b. Is a price taker in the output market but not the product market. c. Is a price taker in the product market but not the output market. d. Is not a price taker in either the product nor the output market. 2. A production function is a mathematical statement that a. Relates the level of output to the level of inputs used. b. Expresses the relationship between the prices of factors of production and the level of output produced. c. Expresses the relationship between the amount of inputs used and the prices of those inputs. d. May have the property of increasing returns to scale or constant returns to scale, but not the property of decreasing returns to scale. 3. Aggregate income in an economy is a. Equal to the total number of dollars earned by workers. b. Always equal to aggregate production in that economy. c. Equivalent to the dollar amount of payments made to owners of capital. d. Equal to the total number of dollars earned as profits by firm owners. 4. Constant returns to scale occurs when a. The production function is linearly homogenous. b. The exponents of capital and labor in the production function sum to one. c. A doubling of inputs results in a doubling of output. d. All of the above. 5. Firms should continue to hire labor up to that point where a. The marginal product of labor is just greater than the market wage rate. b. The market wage rate is just greater than the marginal product of labor. c. The marginal product of labor for the last unit of labor is just equal to the real wage rate. d. The marginal product of labor for the last unit of labor is just equal to the price of the output. 6. According to Euler’s Theorem, total output is equal to the sum of all factor payments provided that a. Each factor of production is paid a real wage equal to its marginal product. b. The production function is linearly homogenous (that is, it has constant returns to scale).
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c. Equal amounts of capital and labor are used. d.
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This note was uploaded on 08/08/2008 for the course ECON 302 taught by Professor Gold during the Spring '07 term at Wisconsin.

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practicequestions2spring2005 - Economics 302 Spring 2005...

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