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Midterm 1 Answers - Econ 100B Midterm 1 Version B Blue...

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Econ 100B, Midterm 1 LAST NAME: __________________________ Version B Blue Tuesday, January 27, 2009 FIRST NAME: _________________________ © 2009, Yuan Emily Tang All rights reserved. STUDENT ID: _________________________ SIGNATURE: __________________________ You have one hour and twenty minutes for the exam. Show all work. We reserve the right to deduct points from answers that are hard to read. There are a total of 50 points possible. No notes, calculators, electronic devices, etc. are allowed. Relax and enjoy the exam. 1) (8 pts total) A firm’s short run total cost function is given by 500 1000 40 ) ( 2 3 + + - = q q q q C a. What is the firm’s fixed cost? (1 pt) FC=500 b. What is the firm’s average variable cost? (2 pts) 1000 40 ) ( 2 + - = = q q q q C AVC c. What is the firm’s marginal cost? (2 pts) 1000 80 3 ) ( 2 + - = = q q dq q dC MC d. At what level of Q is short run average variable cost minimized? (2 pts) q=20 e. What will MC be at the point where short run average variable cost is at its minimum? (1 pt)
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MC=600 2) (9 pts total) For the following production functions (a) show whether the diminishing marginal product of labor is satisfied, (b) show whether diminishing marginal rate of technical substitution | MRTS| is satisfied, and (c) show whether the function has increasing, decreasing, or constant returns to scale i) q=KL+K+L (3 pts) a) no, not diminishing b) yes, diminishing c) increasing returns to scale ii) q=4K 2 L 2 (3 pts) a) no, not diminishing b) yes, diminishing c) increasing returns to scale iii) q=min(2K, L) (3 pts) a) no, not diminishing b) no, not diminishing c) constant returns to scale
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3)
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