2B 2009 Exam memo (2).pdf - DEPARTMENT OF ECONOMICS AND ECONOMETRICS ECONOMICS 2B FINAL ASSESSMENT NOVEMBER 2009 APK SOWETO CAMPUSES DATE ATTENDANCE

2B 2009 Exam memo (2).pdf - DEPARTMENT OF ECONOMICS AND...

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DEPARTMENT OF ECONOMICS AND ECONOMETRICS ECONOMICS 2B FINAL ASSESSMENT: NOVEMBER 2009 APK & SOWETO CAMPUSES DATE: 3/11/2009 ATTENDANCE SLIP Surname: MEMORANDUM Initials: ……………………………………………. ....................... Student number: …………………………….. ............................ Cell number: ............................................................................... This paper consists of 12 pages. You may use a noiseless calculator. Switch your calculator to 4 decimal points.
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Economics 2B Final Assessment: November 2009 2 DEPARTMENT OF ECONOMICS AND ECONOMETRICS ECONOMICS 2B FINAL ASSESSMENT: NOVEMBER 2009 APK & SOWETO CAMPUSES DATE: 3/11/2009 MARKS: 100 TIME: 2 HOURS ASSESSORS: Prof G van Zyl, Ms JMM Viljoen & Ms A Ohonba MODERATOR: Prof L Greyling SURNAME MEMORANDUM INITIALS STUDENT NUMBER CELL NUMBER Mark schedule Mark Mark Mark Mark Mark Q1 Q2 Q3 Q4 Q5 1.1 [6] 2.1 [3] 3.1 [10] 4.1 [10] 5.1 [5] 1.2 [5] 2.2 [5] 3.2 [10] 4.2 [5] 5.2 [5] 1.3 [5] 2.3 [2] 4.3 [5] 5.3 [6] 1.4 [4] 2.4 [5] 5.4 [4] 2.5 [5] Total mark : [100]
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Economics 2B Final Assessment: November 2009 3 Question 1: The firm and the input base [20] 1.1 Assume capital to be measured on the vertical axis and labour on the horizontal axis. The ratio of the marginal products on an isoquant is expressed as [ MP L /MP K or MP K /MP L ] and will become [ smaller or larger ] as more capital is utilised compared to labour. On the upper ridge line the marginal productivity of additional units of labour is equal to [ zero or infinity ] . In the case of technological improvement the MRTS at each K/L ratio on the new isoquants are [ lower or greater] than the MRTS at each K/L ratio on the old isoquants. For constant returns to scale outlay the LAC will be [ increasing or constant ]. Technological change increases the MP of [ both capital and labour or only capital] . (6) 1.2 Assume the following figure. Answer the following questions. (5) Question Answer 1. At which of the two points (c or d) will a relative decrease in consumption today (Co) create a greater relative consumption tomorrow (C1)? 2. At which of the two points (c or d) will the rate of return on capital investment be negative? 3. At which of the two points (E or d) will the rate of return on capital investment be greater? 4. Is it true or false to say that at point E individuals are willing to trade one unit of Co today for more than 1 + r* units of consumption tomorrow? 5. Is the rate of return on capital positive or negative at point E? negative
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(5) Question Answer 1. What will happen to the purchase of capital stock if r r /P > r m . (increase or decrease). increase
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