Exam2 - D O N OT T AKE T IDS E XAM A PART Student Name TEST...

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DO NOT TAKE TIDS EXAM APART Student Name TEST II Prof. Vitaliano Managerial Economics Fall 2009 Answer Four Questions, but only four (25 pts each). Answ~r every bullet. Show All Work. Circle the number ofthefour questions you answer. 1. LABOR 1 2 3 4 5 6 7 8 1 10.0 16.2 21.6 26.4 30.9 35.1 39.0 42.9 2 12.3 20.0 26.6 32.5 38.0 43.2 48.1 52.8 CAPITAL 3 13.9 22.6 30.0 36.7 42.9 48.7 54.3 59.6 (Machines) 4 15.2 24.6 32.7 40.0 46.8 52.8 58.2 63.0 5 16.2 26.3 35.0 42.8 50.0 56.8 63.3 69.5 6 17.1 27.8 36.9 45.2 52.8 60.0 66.8 73.4 7 17.9 29.1 38.7 47.3 55.3 62.8 70.0 76.9 8 18.7 30.3 40.3 49.2 57.6 65.4 72.9 80.0 Sam's Sandal Co assembles pre-cut pieces of leather into sandals using labor and machines. Each cell represents the number of sandals assembled per day with various amounts ofthe two inputs, Shown in bold face are three points on the isoquant for Q = 52.8. To show other isoquants needs fractional units ofthe inputs. - Plot the three input combinations for Q = 52.8 and show that the isoquant is convex. Plot K (capital) on the vertical axis and labor (L) on the horizontal axis.(IO) - Between K = 6, L = 5 and K = 4 and L = 6, show that (oQ/oK)dK + (oQ/oL)dL = O. (10) - This is a Cobb-Douglas production function and the elasticity ofoutput with respect to capital is 0.30. What must be the elasticity ofoutput with respect to labor input? (5) 2.- Sam's Sandal is currently producing 40 pairs of sandals using K = L = 4, which is a least cost input combination. Long-run marginal cost is $20.54 per pair ofsandals. What must be the wage rate (w) and rental price ofcapital r? (10) - Calculate the marginal cost of sandals for K = 4, and L = 5, 6, 7, and 8. (10) - What is Sam's Sandal long-run elasticity oftotal and average cost? (5) 3. The following is a simplified version ofthe Cobb-Douglas production function you estimated for electricity generation in Lab # 3 (all coefficients are significant): InQ = 1.241 + .31(lnEquipment)
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Exam2 - D O N OT T AKE T IDS E XAM A PART Student Name TEST...

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