Intermediate Microeconomics: A Modern Approach, Seventh Edition

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Econ 301 – F07 PROBLEM SET 5 - due in class on Thursday Nov 1 Wissink 1. Critically evaluate the following statements and explain in what way or ways they are true, false, or uncertain. a. Constant returns to scale is incompatible with the law of diminishing marginal productivity. b. If an input’s marginal product curve is falling, so must its average product curve. c. If marginal cost is rising, then average variable cost must also be rising. d. When average total cost is rising, then so is marginal cost and average variable cost. e. To cost minimize, the firm should juggle the use of variable inputs until the marginal products of all the variable inputs are equal to each other. 2. x = L 1/2 K 1/2 and that w=$2 and r=$2. a. Find the 3 long run cost curves and graph them. b. Find the 7 short run cost curves assuming K=25 and graph them. 3. Suppose x = L 2 K 2 and that w=$2 and r=$2. a. Find the 3 long run cost curves and graph them.
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