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2X03 Test 1 Short Answers Spring 2007 Practice Test

# 2X03 Test 1 Short Answers Spring 2007 Practice Test - F(z 1...

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Page 1 of 5 ECONOMICS 2G03/2X03 SPRING 2007 CLASS TEST #1 May 14, 2007 Time: 2 hours during class NAME: ________________________________________________________________ STUDENT ID#: ___________________________________________ MUGSI ID: ______________________________________________ WRITTEN QUESTIONS ANSWER THESE QUESTIONS ON THIS PAPER IN THE SPACE PROVIDED. YOU MAY USE PEN OR PENCIL, BUT ONLY ANSWERS WRITTEN IN PEN MAY BE CONSIDERED FOR RE-EVALUATION IF WARRANTED. PRINT LEGIBLY. UNREADABLE ANSWERS WILL NOT BE GIVEN MARKS. PART MARKS ARE AVAILABLE. SHOW ALL YOUR WORK. HAND IN THIS PAPER SEPARATELY FROM YOUR SCAN SECTION OF THE TEST. THERE ARE 6 QUESTIONS FOR A TOTAL OF 25 POSSIBLE MARKS FOR THIS SECTION OF THE TEST. THIS PAPER CONTAINS 5 PAGES, INCLUDING THIS COVER SHEET.

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Page 2 of 5 1. A firm has the production function y = z 1 1/4 z 2 3/4 . Input prices are w 1 = \$54 and w 2 = \$2. What is the minimum cost of producing 10 units of output? (8 marks)
Page 3 of 5 2. For the production function

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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 cost-minimizing 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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