310-1 Practice Exam 2 Questions

310-1 Practice Exam - Economics 310-1 Practice Exam 2 Questions 1 The vertical distance between the total variable cost curve and the total cost

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Economics 310-1 Practice Exam 2 Questions 1. The vertical distance between the total variable cost curve and the total cost curve A. declines as quantity increases. B. increases as quantity increases. C. remains the same as quantity increases. 2. Which of the following is true? A. AP L is given by the slope of a ray from the origin of (L,Q) space to the TP L function. B. For AP L to be increasing, MP L must be increasing faster. C. An improvement in technology causes isoquants to shift outward. D. A and B. E. A and C. F. None of the above. 3. Which of the following is true? A. Isoquants slope downward since both inputs are productive. B. The short run total cost (SRTC) function lies everywhere above the long run total cost (LRTC) function since the firm is unable to make all optimal input adjustments in the short run. C. The second order condition for profit maximization says that MR must be increasing faster than MC for profit to be maximized. D. A and B. E. A and C. F. B and C. G. All of the above. H. None of the above. 4. Floyd loves Fiona and writes love sonnets to her though he finds it difficult. If the concept of diminishing marginal returns is relevant in this case, each additional sonnet that he writes per month will A. require more time than the previous sonnets. B. decrease the total number of sonnets written. C. require the same time as the previous sonnets. D. increase the average number of sonnets written per month. E. require less time than the previous sonnets. 5. The Lagrangian multiplier for the problem of minimizing cost for a given output level tells us A. how much an extra unit of output will cost if the firm produces optimally. B. how much extra output the firm will get by spending $1 more if it produces optimally. C. A and B. D. None of the above. 6. Consider the production function Q = ½ KL 1/2 . The production technology will exhibit A. increasing returns to scale. B. decreasing returns to scale. C. both A and B. D. indeterminate returns to scale since the level of output and input prices are unknown. 7. A firm’s total cost is given by TC = Q 2 +2Q + 100 and MC = 2Q + 2. At what level of Q does the firm’s average cost curve reach a minimum? A. 100 B. 2 C. 10 D. 20
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8. Which of the following is true? A. AP L is given by the slope of the TP L function. B. AP L equals MP L when the slope of the ray from the origin to the TP L is just tangent to the TP L. C. Isoquants are convex to the origin since we assume that both inputs are productive. D. A and B. E. A and C. F. B and C. G. None of the above. 9. Suppose that both labor and capital are variable and that at a firm’s current combination of labor and capital that MP L = 10, MP K = 15, w = 3, and r = 8. This firm A. is currently maximizing output for the costs it is incurring. B. could increase output by increasing the usage of capital and decreasing the usage of labor.
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This note was uploaded on 10/05/2011 for the course ECON 310-1 taught by Professor Schulz during the Spring '08 term at Northwestern.

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310-1 Practice Exam - Economics 310-1 Practice Exam 2 Questions 1 The vertical distance between the total variable cost curve and the total cost

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