Some exercises on Production0

Some exercises on Production0 - Production When we have...

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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. a) Both I and II are true. b) Both I and II are false. c) I is true; II is false. d) I is false; II is true. 4. For the production function 1 1 3 3 3 Q K L = , the equation for a typical isoquant is a) 3 Q K L = b) 3 9 Q K L = c) 3 27 Q K L = d) 3 27 K LQ =
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Increasing marginal returns occur when the total product function is a. decreasing. b. increasing at a decreasing rate. c. increasing at a constant rate. d. Increasing at an increasing rate 6. Assume that in the short run the level of capital is fixed. The production function is Q KL = . The firm’s short-run 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 = + 7. Suppose in a particular production process that capital and labour are perfect substitutes so that two units of labour are equivalent to one unit of capital. If the price of capital is $1 per unit and the price of labour is $1 per unit, the firm should a) employ capital only. b)
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This note was uploaded on 10/04/2011 for the course ECONOMICS 281 taught by Professor Vg during the Spring '09 term at University of Alberta.

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Some exercises on Production0 - Production When we have...

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