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Unformatted text preview: Ecn 100 - Intermediate Microeconomics University of California - Davis June 8, 2010 Instructor: John Parman Final Exam - Solutions You have until 10:00am to complete this exam. Be certain to put your name, id number and section on both the exam and your scantron sheet and fill in test form A on the scantron. Answer all multiple choice questions on your scantron sheet. Choose the single best answer for each question; if you fill in multiple answers for a question you will be marked wrong. Answer the long answer questions directly on the exam. You must show your work for full credit. Answers may be left as fractions. Please place a box around final answers when appropriate. Good luck! Name: ID Number: Section: SECTION I: MULTIPLE CHOICE (50 points) 1. A firm is currently producing at a level of output where the marginal cost of the last unit produced exceeded the marginal revenue of the last unit produced. This firm: (a) May be maximizing profits and could be a competitive firm or a monopoly. (b) May be maximizing profits but only if it is a monopolist. (c) May be maximizing profits but only if it is a perfectly competitive firm. (d) Is not maximizing profits. (d) The firm lost money on the last unit that it produced (since the cost of that unit exceeded the revenue from that unit). So the firm could increase profits by reducing output by one unit. 2. If Adam’s marginal utility from apples is positive and his marginal utility from oranges is negative, on a graph with apples on the horizontal axis and oranges on the vertical axis: (a) Adam’s indifference curves will have a positive slope. (b) Adam’s indifference curves will have a negative slope. (c) Adam’s indifference curves will be horizontal lines. (d) Adam’s indifference curves will be vertical lines. (a) If we increase the number of apples consumed, Adam’s utility will increase. To offset the increase in utility and keep Adam on the same indifference curve, we must increase the number of oranges to bring his utility back down. 3. Suppose that a firm uses capital and labor as its only two inputs. The firm’s production technology exhibits a positive, diminishing marginal product of capital, a positive, diminishing marginal product of labor, and smooth convex isoquants. Currently the firm is minimizing costs by using 10 units of capital and 10 units of labor. If the price of labor increases relative to the price of capital, the firm will: (a) Increase the amount of labor and increase the amount of capital they use if they want to continue producing the same amount and minimize costs. (b) Increase the amount of labor and decrease the amount of capital they use if they want to continue producing the same amount and minimize costs. 2 Final Exam - Solutions (c) Decrease the amount of labor and increase the amount of capital they use if they want to continue producing the same amount and minimize costs....
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This note was uploaded on 10/22/2010 for the course ECN 100 taught by Professor Parman during the Fall '08 term at UC Davis.
- Fall '08