Final Exam Sample Questions

# Final Exam Sample Questions - Final Exam Sample Questions 1...

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Final Exam Sample Questions 1. a. I would consume 6 éclairs. b. I spend \$12 on the 6 éclairs. c. The most I would be willing to pay for 6 éclairs is \$21. d. My consumer surplus is \$9. e. If the government limits me to 2 éclairs, I will spend \$8. f. The most I would be willing to pay for 2 éclairs is \$9. g. My consumer surplus is now \$1, which is \$8 less. h. Producer surplus increases from \$0 to \$4. i. The deadweight loss is \$4. 2. Q = 5K (1/2) L (1/2) a. Labor K 0 1 2 3 4 5 0 0 0 0 0 0 0 1 0 5 7.1 8.7 10 11.2 2 0 7.1 10 12.2 14.1 15.8 3 0 8.7 12.2 15 17.3 19.4 4 0 10 14.1 17.3 20 22.4 5 0 11.2 15.8 19.4 22.4 25 c. Constant Returns to Scale because when K and L double, Q also doubles.

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d. Labor Output (Q) Marginal Product 0 0 - 1 7.1 7.1 2 10 2.9 3 12.2 2.2 4 14.1 1.9 5 15.8 1.7 e. Yes, there are diminishing marginal returns because as output increases, MP decreases. f. The least cost method of producing 10 surfboards when P(K) is \$100 and P(L) is \$100 is 2 units of capital and 2 units of labor. The total cost is \$400. g. The least cost method of producing 10 surfboards when P(K) is \$200 and P(L) is \$100 is 1 unit of capital and 4 units of labor. The total cost is \$600.
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