ECN100 Final SS2-09 Key Parman

ECN100 Final SS2-09 Key Parman - Ecn 100 Intermediate...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Ecn 100 - Intermediate Microeconomic Theory University of California - Davis September 9, 2009 Instructor: John Parman Final Exam - Solutions You have until 1:50pm 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 (60 points) 1. A firm with smooth, convex isoquants and a diminishing technical rate of substitution is currently minimizing costs by using 10 units of capital and 10 units of labor. If the rental rate of capital increases and the firm wants to keep producing the same amount of output, it will: (a) Switch to using more than 10 units of labor and more than 10 units of capital. (b) Switch to using less than 10 units of labor and more than 10 units of capital. (c) Switch to using more than 10 units of labor and less than 10 units of capital. (d) Switch to using less than 10 units of labor and less than 10 units of capital. (c) If the rental rate of capital increases relative to the wage, the isocost lines will get flatter (on a graph with labor on the horizontal axis and capital on the vertical axis). At the old combination of capital and labor, there will now be points down and to the right along the isoquant that will lie below the isocost curve. So the firm can lower its costs by switching to using more labor and less capital. 2. Bundles on the same indifference curve: (a) By definition, two bundles on the same indifference curve give the consumer the same level of utility. Indifference curves don’t tell us about how much the bundles cost. 3. If average variable costs are rising as output increases, which of the following must be true?
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Final Exam - Solutions (c) When marginal costs are above average variable costs, the next unit produced will increase variable costs by an amount greater than the current average, pulling up the average variable costs. Average total costs may still be falling due to falling average fixed costs.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern