Mdtrm2_sampl_problm

# Mdtrm2_sampl_problm - Sample problems for midterm 2 1 The...

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Sample problems for midterm 2 1. The long-run total cost curve shows a) The various combinations of capital and labor that will produce different levels of output at the same cost. b) The various combinations of capital and labor that will produce the same level of output. c) The minimum total cost to produce any level of output in the long-run. d) For a fixed level of capital, the minimum cost to produce a given level of output. 2. Assume that capital is measured along the vertical axis, and labor is measured along the horizontal axis. The firm has an initial isocost line called 1 TC . Now suppose that the price of capital falls. Which statement accurately describes the movement of the isocost line from 1 TC to 2 TC ? a) The slope of the isocost line becomes flatter. b) The slope of the isocost line becomes steeper. c) The slope of the isocost line is unchanged. d) We cannot determine whether the slope becomes flatter or steeper. 3. Which of the following is an accurate specification of a firm’s long-run total cost curve? a) TC FC VC = + . b) TC VC = . c) TC wL rK = + . d) Both b) and c) are correct. 4. When the price of all inputs increase by the same percentage, a) The firm’s total cost curve will rotate upward by a higher percentage if the firm’s production technology exhibits decreasing returns to scale. b)

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Mdtrm2_sampl_problm - Sample problems for midterm 2 1 The...

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