midans07 - YORK UNIVERSITY Economics 2358 P: Barry Smith...

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Unformatted text preview: YORK UNIVERSITY Economics 2358 P: Barry Smith Midterm Exam Winter 3% 2.49 o -?' Instructions. The exam consists of 3 parts: A, B and C. Part A contains choice and is worth 15 marks. Part B contains no choice and is worth 15 points. Part G contains no choice and is worth 10 marks. You have 80 minutes to com- plete this exam so, roughly speaking, you have 30 minutes for part A, 30 minutes for part B and 20 minutes for part C. Write your answers in the exam booklets that have been supplied to you. Be sure to provide the information requested at the front of the exam booklets. You can only use primitive calculators. If you answer in pencil, your exam will not be remarked after it is returned to you. Part A Answer 3 of the following 4 questions. Each question involves a statement. Be sure to define all relevant terms entering the questions. Include diagrams when they might clarify your answer. Each question is worth 5 marks. . There are no such things as Gifi'en inputs for cost minimizing firms. (Oops!) . Suppose that long run total cost is proportional to the square root of output. What can you deduce about economies of scale and why? (I would prefer an intuitive argument to a technical one but I will accept either.) . A profit maximizing competitive firm will always expand output if price is greater than marginal cost. . The long run is the best short run. Part B Answer the following question. It is worth 15 marks. . Suppose that a firm has a production function given by: y 2 9:15:52 (3.) Derive the short run total cost function for this firm when :32 is constrained to be equal to 1 and the factor prices are wl = l and 132 = 1. (b) Graph the short run total, marginal and average cost functions. (c) Derive the long run cost function and graph it. (d) Compare the long run cost function to the short run cost function derived for the case where 932 = 1. (Hint: To answer this question you must first find the output level where the long run demand for factor 332 equals 1.) Part C Answer the following question. It is worth 10 marks. 1. A firm produces output in two plants. In plant 1, it has a long run cost function given by: 01(y1) = 21,11. In plant 2 the bug run cost function is given by: 02(y2) = 4:93- (a) How should the firm allocate output between the two plants so as to produce a total output of 1 unit (to +y2 = 1). (b) Next, suppose that the cost function in plant 1 is given by: 01(y1) = 2y‘15. How should the firm allocate output between the two plants so as to produce a total output of 1 unit (3J1 + y2 = 1). (Note: This is hard. You won’t be able to give me an exact solution. I’ll give you marks for telling me how you would go about solving this problem.) fixtA. 1. 10¢. Ajél'fikw m figwmiij- u I»? Foe/1‘ 4mm! MW ma £4,517mie Amaze) Mai/puféw. J) shy/o W 40 W14 2‘» am 214 V72»; (M & mm- <s+e+~>_- .a 2). Can't 2';er mm W far? ML (MC WAC w W 019mm}? _fi§ia..u&hucl¥b ‘ a» _ (Ev/7‘2 cw AL ckng “hf-1m,fc@w¢ww WW mfiathCA Ifmmm) w “Purge/014913) cm day/AW, mt WMhM. ’14»: fluswmsuflfifléwf-[ufng—M 5. gm MKM 22L; Afime, WW1“;th m. Wgwgw flag/AM mfg}; faggmwmlg flaw/611A mam _ in mwfi mwmw dam Ww" 42w”; {aw M 4; SK W fimfwé 1% M H Vila—7714+ hath/'61:? at In. I‘m—4931' W4 252 Hie 14,71;wa M («fl/KW _ gfiméz» W 4,: Arvbrow l/flfiijfv%4MMV—emk 2/ .L _2— LTC=W§+was= 3 ZSHO 352/; 1/: 33—“— 173x211”: (7-2.3 5g: , / /%:Af?: A m 1’? 214511. fiwggTC : gt“: i-H 3}: w ~L 7’ Z 5“ n}: M LRTC ‘3 = #3 ’~ I fl wlx‘wlxh :3: +1 I U; 2 l 27/3 Z: 2? W l. J M i L 1. 1L M” W 231/3 w a $4.; #:752er— ‘6‘. @ MCL32- ‘5 ital/31:) ypg‘? m QMWWWM 5‘} I; / ,. >4.) W ff; 7 ...
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midans07 - YORK UNIVERSITY Economics 2358 P: Barry Smith...

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