Production
When we have finished Ch 8, take 45 minutes to solve this practice exam (10 Multiple
Choice questions and 3 Problems). The solutions are at the end of this document.
1.
The marginal rate of technical substitution MRTS
LK
tells us
a)
the slope of an isoquant.
b)
the rate at which the quantity of capital can be decreased for every one
unit increase in the quantity of labour, holding the quantity of output
constant.
c)
the rate at which the quantity of capital must be decreased for every one
unit decrease in the quantity of labour.
d)
Both a) and b), but not c).
2.
Economies of scale exist when firms have
a)
increasing returns to scale.
b)
constant returns to scale.
c)
decreasing returns to scale.
d)
constant marginal cost.
3.
Identify the truthfulness of the following statements.
I.
Marginal cost can be measured as the slope of the total cost curve.
II.
Average total cost can be measured as the slope of the ray from the origin
to the total cost curve.
4.
For the production function
1
1
3
3
3
Q
K
L
=
, the equation for a typical isoquant is
Q
K
L
=
Q
K
L
=
Q
K
L
=
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5.
Increasing marginal returns occur when the total product function is
6.
Assume that in the short run the level of capital is fixed. The production function
is
Q
KL
=
.
The firm’s shortrun total cost curve is
a)
2
Q
STC
K
=
b)
wK
STC
rK
Q
=
+
c)
2
STC
Q
K
=
+
d)
2
wQ
STC
rK
K
=
+
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 Spring '09
 VG
 Economics, Economics of production, Cost curve, total cost curve, 0 L

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