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PQ exam 3 - ECON 303 Practice Questions for Exam 3 1...

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ECON 303 Practice Questions for Exam 3 1. Consider a cost function C(Q) = 100 + 10Q + Q 2 . What is: a. the average fixed cost of producing 20 units of output? ( Answer: $5) b. the average variable cost of producing 10 units of output? ( Answer: $20) c. the average cost of producing 5 units of output? ( Answer: $35) d. the marginal cost of producing 2 units of output? ( Answer: $14) 2. Consider a cost function C(Q) = 100 + 10Q + Q 2 . What is: a. the average fixed cost of producing 10 units of output? ( Answer: $10) b. the average variable cost of producing 15 units of output? ( Answer: $25) c. the average cost of producing 4 units of output? ( Answer: $39) d. the marginal cost of producing 3 units of output? ( Answer: $16) 3. Consider the production function Q = L 4 . a. If L is increased by one percent, by what percentage will output increase? ( Answer: 4%) b. What does the answer to (a) say about returns to scale? ( Answer: Increasing returns to scale) c. What does the answers to (a) and (b) say about the relationship between plant size and long-run average cost? ( Answer: Economies of scale) 4. Consider the production function Q = L 1/2 .
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