Econ+100+A-+Fall11-+Midterm+II-Version+A

# Econ+100+A-+Fall11-+Midterm+II-Version+A - UCI- Winter 2011...

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UCI- Winter 2011 Econ 100 A-Midterm II Prof El Hag Part I: Please answer all of the following multiple choice questions ( possible points 140) 1) Increasing returns to scale in production means A) more than 10% as much of all inputs are required to increase output 10%. B) less than twice as much of all inputs are required to double output. C) more than twice as much of only one input is required to double output. D) isoquants must be linear. Answer: B Figure 6.1 2) Refer to Figure 6.1. At point A, the marginal product of labor is A) rising. B) at its minimum. C) at its maximum. D) diminishing. Answer: A 3) Refer to Figure 6.1. Which of the following statements is false? A) At point E the marginal product of labor is decreasing. B) At point E the marginal product of labor is negative. C) At point E the average product of labor is decreasing.

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D) At point E the average product of labor is negative. E) At point E the marginal product of labor is less than the average product of labor. Answer: D 4) A farmer uses M units of machinery and L hours of labor to produce C tons of corn, with the following production function C = L 0.5 M 0.75 . This production function exhibits A) decreasing returns to scale for all output levels B) constant returns to scale for all output levels C) increasing returns to scale for all output levels D) no clear pattern of returns to scale Answer: C 5) Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). The average product of labor and the marginal product of labor are both equal to AP = MP = 5K. Does labor exhibit diminishing marginal returns in this case? A) Yes, if capital also exhibits diminishing marginal returns. B) Yes, this is true for all values of K. C) No, the marginal product of labor is constant (for a given K). D) No, the marginal product of labor is increasing (for a given K). Answer: C 6) The marginal rate of technical substitution is equal to the A) slope of the total product curve. B) change in output minus the change in labor. C) change in output divided by the change in labor. D) ratio of the marginal products of the inputs. Answer: D 7) An examination of the production isoquants in the diagram below reveals that:
A) capital and labor will be used in fixed proportions. B) Capital and labor are perfectly substitutable.

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## This note was uploaded on 12/13/2011 for the course ECON 100A taught by Professor Safarzadeh during the Fall '09 term at UC Irvine.

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Econ+100+A-+Fall11-+Midterm+II-Version+A - UCI- Winter 2011...

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