# e360_apks_midterm2practice_answerkey - Midterm 2 Practice...

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Midterm 2 Practice Questions Answer Key Andreas Pape, Kai Sun 1. a. The production function is decreasing returns to scale. Opening a second firm seems to be a better idea. b. We don’t have enough information about the fixed cost in the short run. In the long run, 1/2 3/4 1/4 1/2 1 22 MPL K L K MPK L K L == = 2 K L = 2. The claim is true. There is no dead weight loss in a perfectly competitive market. 3. EXPLAIN IN YOUR OWN WORDS. 4. a. MC= =3q A=3; B=0 b. p=MC=3q q=p/3 c. elasticity= =p/3q p=6, q=2 elasticity=6/(3*2)=1 1

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Midterm 2 Practice Questions Answer Key Andreas Pape, Kai Sun d. PS=(1/2)*2*6=6 e. Profit=6*2-((3/2)*( )+5)=1 5. a. 100-p=p/3 Ö p=75, q=25 p q S q D q b.

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