Econ302-hw4-spring11-solution - Econ302 Homework Assignment...

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1 Econ302 Homework Assignment 4 Solutions Part I. Multiple Choice Questions 1. A production function defines the output that can be produced a. at the lowest cost, given the inputs available. b. with the fewest amount of inputs. c . if t h e firm i s ec hni ally ffi i n d. in a given time period if no additional inputs are hired. e. as technology changes over time. 2. Graphically, the average productivity of labor would be illustrated by a. the slope of the total product curve at the relevant point. b. the slope of the marginal productivity curve at the relevant point. c. the negative of the slope of the marginal productivity curve at the relevant point. d lop of hord onn ing origin wi h r l van poin on o al ou pu urv 3. What describes the graphical relationship between average product and marginal product? a. Average product cuts marginal product from above, at the maximum point of marginal product. b. Average product cuts marginal product from below, at the maximum point of marginal product. Marginal produ u ts av rag produ from abov , a maximum poin of av d. Marginal product cuts average product from below, at the maximum point of average product. e. Average and marginal product do not intersect.
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2 Figur e 1 4. Refer to Figure 1. The situation pictured is one of a. constant returns to scale, because the line through the origin is linear. b. decreasing returns to scale, because the isoquants are convex. c . d ec r e a s ing r t urn o al , b au doubling inpu ts ul in l ss han doubl h amoun of ou pu d. increasing returns to scale, because the isoquants are convex. e. increasing returns to scale, because doubling inputs results in more than double the amount of output. 5. The production function q = a. exhibits constant returns to scale and constant marginal productivities for K and L . b. exhibits diminishing returns to scale and diminishing marginal productivities for and . xhibi on st an and dimini hing marginal produ ivi i for K and L d. exhibits diminishing returns to scale and constant marginal productivities for and . 6. Suppose MP L = 40 and MP K = 20 and the rental rate on capital is $10. If the level of production is currently efficient the wage rate must be a. $10 b. $40 c. $5 $20 e. none of the above 7. A linear total cost curve which passes through the origin implies that a. average cost is constant and marginal cost is variable. b. average cost is variable and marginal cost is constant. av rag and marginal o sts ar and qual d. need more information to answer question.
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3 8 . A firm’s marginal cost curve a. is always U-shaped. b. always has a positive slope. c. is always below its average cost curve. d . alway s in t e r ec ts i av rag c o st urv a minimum poin 9. Suppose a production function is Q = K 1/2 L 1/3 and in the short run capital (K) is fixed at 100. If the wage is $10 and the rental rate on capital is $20, the short run average cost is SC = + b. SC = c. SC = + 10Q 2 d. SC = Q 2 10. If a graph of a perfectly competitive firm shows that the P=MC point occurs where P is above AVC but below ATC, a.
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This note was uploaded on 05/25/2011 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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Econ302-hw4-spring11-solution - Econ302 Homework Assignment...

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