KEY912F - BUSINESS 802 MANAGERIAL ECONOMICS FINAL EXAM KEY...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
BUSINESS 802 FINAL EXAM KEY FALL 1991 MANAGERIAL ECONOMICS SHORT ANSWER (5 pts each) 1. Production Function Concepts. Indicate whether each of the following statements is true or false . A. Decreasing returns to scale and declining average costs are indicated when e Q < 1. B. If the marginal product of capital falls as capital usage grows, the returns to capital are decreasing. C. L-shaped isoquants describe production systems in which inputs are perfect substitutes. D. Marginal revenue product measures the profit earned through expanding input usage. E. The marginal rate of technical substitution will be affected by a given percentage increase in the marginal productivity of all inputs. 1. SOLUTION A. True. When e Q < 1, the percentage change in output is less than a given percentage change in all inputs. Thus, decreasing returns to scale and increasing average costs are indicated. B. True. Returns to the capital input factor are decreasing when the marginal product of capital falls as capital usage grows. C. False. L-shaped production isoquants reflect a perfect complementary relation among inputs. D. False. Marginal revenue product is the revenue generated by expanding input usage, and represents the maximum that could be paid to expand usage. Since MRP is calculated before input costs (wages in the case of labor, for example), it does not measure the increase in profit earned through expansion. E. False. The marginal rate of technical substitution is measured by the relative marginal productivity of input factors. This relation is unaffected by a commensurate increase in the marginal productivity of all inputs. 2. Cost Curves. Indicate whether each of the following involves an upward or downward shift in the long-run average cost curve or, instead, involves a leftward or rightward movement along a given curve. Also indicate whether each will have an increasing, decreasing, or uncertain effect on the level of average cost.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 A. A rise in wage rates B. A decline in output C. An energy-saving technical change D. A fall in interest rates E. An increase in learning or experience 2. SOLUTION A. A rise in wage rates will cause an upward shift in the LRAC curve, and increase LRAC. B. A decline in output will be reflected in a leftward movement along a given LRAC curve, and involve an uncertain effect on the level of LRAC. C. Energy-saving technical change will cause a downward shift in the LRAC curve, and decrease LRAC. D. A fall in interest rates gives rise to a downward shift in the LRAC curve, and a decrease in LRAC. E. Learning, like any beneficial technical change or innovation, will cause a downward shift in the LRAC curve, and decrease LRAC. 3. Market Structure Concepts. Indicate whether each of the following statements is true or false . A.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 16

KEY912F - BUSINESS 802 MANAGERIAL ECONOMICS FINAL EXAM KEY...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online