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ARME 608
First Exam
Fall 1996
1.
Given the production function y = 2x
±
and the price of x as r, derive and graph the
total cost, marginal cost, and average cost functions.
What happens to these three
functions if the price of x increases?
2.
Is the production function y xx xx
=+
12
1
2
2
2
,
homogeneous?
Is it homothetic?
3.
Is the following sentence true or false (show):
If a firm is maximizing profit, then the
rate of change of output with respect to a input price change is equal to the rate of

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