Quiz 2 Solution - 875 50/3 25 2000/3 7.a 4 3 4 1 L K Q = 3...

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Econ 2G03/2X03-Quiz 2 Solution Fall 2000 Fred Aswani Part A 1. isocost an steeper th is isoquant then If then 2 1 2 1 2 1 b a w w b a MP MP bz az y < = + = Correct Answer: c 2. Constant) ( 3 2 3 2 3 2 3 , 2 ) 3 , 2 min( 2 1 2 1 2 1 2 1 2 1 w w MC w w y yw yw TC y z y z z z y + = + = + = = = = Also, optimal input bundle given by: 2 3 3 2 2 1 2 1 = = z z z z Correct Answer: e Isoquant Isocost z 1 z 2
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3. 4. 1 , 3 suppose 11 2 1 2 / 1 2 2 / 1 1 = = = w w z z y Cost Minimization 3 1 3 1 3 11 2 2 11 2 11 2 11 1 3 2 1 1 2 1 2 2 / 1 1 2 / 1 2 2 / 1 1 2 / 1 2 2 1 2 / 1 2 2 / 1 1 2 2 2 / 1 1 2 / 1 2 1 1 2 1 2 1 = = = = = = = = = = = z z z z z z z z z z MP MP z z z y MP z z z y MP w w MP MP Correct Answer: b 5. i. 1500 50 2 + - = y y LAC LAC LMC y y y LMC LAC y y dy dLAC = = + - = = + - = = + - = + - = = = - = 875 1500 ) 25 ( 100 ) 25 ( 3 25 at 1500 100 3 875 1500 1250 625 1500 ) 25 ( 50 25 25 0 50 2 2 2 2 AP MP MC AC If MP < AP then MC > AC Correct Answer: c y * y * C z 1 y
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5.ii. 100 6 - = y dy dLMC 1500 , 0 At 3 2000 3 4500 3 5000 9 2500 3 , 3 50 At 3 50 100 6 min., At = = = = + - = = = = LMC LAC y LMC y y y 5.iii. 4 40 10 2 20 10 = = = = r r r r w MP MP K L 6.i. 328 = Q 82 4 328 41 8 328 * * = = = = K L 6.ii. L and K are complements. 0 ) ( 8 4K if , 8 ) ( and 4 ) ( 8 4 if , 4 ) ( then , at fixed is Suppose Similarly, 0 ) ( 4 8 if , 4 ) ( and 8 ) ( 4 8 if , 8 ) ( then , at fixed is Suppose * * * * * * * * = = = = = = = = K MP L L K TP K MP L K K K TP L L L MP K L K L TP L MP K L L L TP K K 6.iii. 2 2 4 8 K L or L K K L = = = LMC LAC y C 1500
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Unformatted text preview: 875 50/3 25 2000/3 7.a. 4 / 3 4 / 1 L K Q = 3 4 3 4 4 / 3 2 3 16 2 2 16 + = = ⇒ = ⇒ = Q SRC Q L L Q K 7.b.i. 4 / 3 4 / 1 L K Q = Path) Expansion of Equation ( 3 1 3 Path, Expansion at 3 3 4 4 4 3 4 4 / 1 4 / 1 4 / 3 4 / 3 4 / 1 4 / 1 4 / 3 4 / 3 L K or K L K L P P MP MP K L K L K L MP MP L K MP K L MP K L K L K L L K = = ⇒ = ⇒ = = ⋅ = = = 7.b.ii. function production into Substitute L K = 100 , 100 If * 4 / 3 4 / 1 = = = ⇒ = L Q Q L L K Q 7.b.iii. Since K = L , then K * = Q 4 4 3 * * = = = + = + = AC MC Q Q Q rK wL TC...
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Quiz 2 Solution - 875 50/3 25 2000/3 7.a 4 3 4 1 L K Q = 3...

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