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Unformatted text preview: F(z 1 , z 2 ) = (z 1 + 3 z 2 ) 2 determine returns to scale for an increase in all inputs by a proportional factor of a , a >1. (3 marks) 3. A total product function is given by y = z 1 1/2 z 2 1/3 . The price of input 1 is $12 and the price of input 2 is $3. a) What is the MRTS when the input bundle is (9, 8)? (3 marks) b) How much output is produced at this input bundle and what is the total cost? (3 marks) Page 4 of 5 4. On the diagram below, illustrate the effect on the costminimizing input bundle if the price of input 1 falls by 50%. Label all important points. (2 marks) 5. What is the short run marginal cost when one variable input has a MP of 25 and its price is $75? (2 marks) Z1 Z2 Page 5 of 5 6. Given the total product function y = z 1 1/2 z 2 1/3 where z 2 is fixed at 8 units, and the price of input 1 is $12 and the price of input 2 is $3, a) Derive the variable cost function. (2 marks) b) Derive the marginal cost function. (2 marks)...
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This note was uploaded on 06/18/2011 for the course ECON 2X03 taught by Professor Jamesbruce during the Fall '10 term at McMaster University.
 Fall '10
 JAMESBRUCE
 Economics

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