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100A Final Exam WI07

100A Final Exam WI07 - Microeconomics ECO 100A Winter 2007...

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Microeconomics, ECO 100A, Winter 2007, Dr. Famulari Final Exam Version A: 500 points total *** You must show your work to get credit for your answers *** . 1. (40 points total) Cars are produced using tires (T) and chassis (C). For each car made, 4 tires and one chassis must be used. A. (10 points) What is the production function for cars? B. (10 points) Draw the isoquant for 10 cars (be sure to label the axis) C. (10 points) Assume the car producers signs a contract to have 10 chassis brought to her store every day for the next month. In the short run, the firm’s chassis quantity is fixed, but she can adjust the amount of tires she uses each day. How many tires will the firm have to use to make various levels of output each day, C SR (q, K )? D. (10 points) What is are the short run total costs of making cars, STC(q, w, r, K ), when the price of chassis are \$5000 and tires are \$50 each? What are the firm’s variable costs of making cars? What are the fixed costs?

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2. (40 points total) Output (Q) is made using two inputs, labor (L) and capital (K). The firm’s production function is q=L α K β 2A. (10 points) Define the marginal product of labor both verbally and mathematically. 2B. (15 points) Under what conditions will the hypothesis of diminishing marginal product of labor hold for this production function? Prove your answer. 2C. (15 points) Provide an intuitive explanation to your friend (who is not an economics major) for why economists hypothesize the marginal product of any input is diminishing.
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