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Unformatted text preview: Ecn 100 - Intermediate Microeconomic Theory University of California - Davis February 27, 2009 Instructor: John Parman Midterm 2 You have until 3pm to complete the exam, be certain to use your time wisely. For multiple choice questions, mark your answer on your scantron sheet. Choose only one answer for each multiple choice question; if more than one letter is filled in for a question it will be marked wrong. For the short answer questions, write your answers directly on the exam. Show your work clearly, place a box around final answers and be certain to label any graphs you draw. Final answers may be left as fractions. Non-graphing calculators may be used but they should not be necessary. Good luck! Name: ID Number: Section: SECTION I: MULTIPLE CHOICE (60 points) 1. Suppose that a firm’s production function exhibits increasing returns to scale. If it costs the firm $100 to produce 20 units of output, then it will cost the firm: (a) Less than $100 to produce 40 units of output. (b) Exactly $200 to produce 40 units of output. (c) More than $200 to produce 40 units of output. (d) Less than $200 to produce 40 units of output. 2. Suppose that apples are a Giffen good. If the price of apples increases, then: (a) The income and substitution effects for apples will both be positive. (b) The income and substitution effects for apples will both be negative. (c) The income effect will be positive and the substitution effect will be negative for apples. (d) The income effect will be negative and the substitution effect will be positive for apples. 3. A firm that uses capital and labor is operating at its profit-maximizing input levels given the current prices of inputs and output. Which of the following price changes would not lead to an increase in labor hired in the short run? (Assume capital is fixed in the short run.) (a) An increase in the price of output and the price of capital. (b) An increase in the price of output and a decrease in the price of capital. (c) An increase in the price of labor and a decrease in the price of capital....
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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