mc2_revised_4_13_11

mc2_revised_4_13_11 - Mock Multiple Choice, the MPs Kyle F....

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Mock Multiple Choice, the MPs Kyle F. Herkenhoff∗ UCLA Department of Economics April 15, 2011 1 Marginals Which of the following are true? (We assume a Cobb-Douglas production function Y = AK α L1−α ) (a) If α = 1/3, then a 6% increase in labor results in a 2% increase in output. (b) If α = 1/3, then a 6% increase in labor results in a 4% increase in output. (c) If α = 1/5, then M PK K Y = 1 5 (d) If α = 1/5, then M PK K Y = 4 5 (e) The following statement M PK K + M PL L = Y holds for α = 1/3 but not for α = 1/5. (f) Two of the above (g) Three of the above (h) None of the above ∗ Correspondence: kfh@ucla.edu 1 ANS: (a) If α = 1/3, then a 6% increase in labor results in a 2% increase in output. FALSE: Use the fact that eY,L = 1−α, now %∆Y = (1−α)%∆L so %∆Y = 2/3·%∆L = 2/3·6 = 4 (b) If α = 1/3, then a 6% increase in labor results in a 4% increase in output. TRUE (c) If α = 1/5, then M PK K Y = 1 5 Y TRUE: this is just using M PK = α K , so it is 1/5 (d) If α = 1/5, then M PK K Y = 4 5 FALSE (e) The following statement M PK K + M PL L = Y holds for α = 1/3 but not for α = 1/5. FALSE: Always true with constant returns to scale production functions like Cobb-Douglas for all α (f) Two of the above ANSWER (g) Three of the above (h) None of the above 2 ...
View Full Document

Page1 / 2

mc2_revised_4_13_11 - Mock Multiple Choice, the MPs Kyle F....

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online