This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: ECONOMICS 201
SPRING 2010 EXAM 2 instructions: Please mark your answers clearly. No ciass notes or other materials are allowed. 100 points total. Each question is worth
5 points with the exception of Q2, Q3, 012(15 points) and Q8‘ OH ([0 points). 1. Characterize the returns to scale (decreasing, constant. or increasing) associated with the following
production functions. (:3 a y=fu3X®Xn=ery+X3 a y=ﬁxpxp:mmpxﬁsxg 2. Dora the Explorer produces two outputs (output A and output B) using two inputs (input 1 and input 2).
The price of output A is PA , and the price of output B is PB. The price of input 1 is wI , and the price of input 2 is w2 . Dora produces output A using the production function yd = f A ( X l" , X 2" J , where Xf‘ is
the amount of input one and X; is the amount of input two allocated to output A. Analogousiy, she
produces output B using the production function y B : f 3 (X ,3 , X2B ) . (15 points) at What is Dora the Explorer’s PMP (proﬁt maximization problem)? b. What are the four ﬁrstorder conditions (with respect to X1”1 , X 2” , X13 , and X 2” )? MFA . MP3
0. Use the FOCs to show that MRTS of output A, {AA . ts equal to MRTS of output B, M}; B .
‘ 2 2 ,3 .3. Robert Woodruff produces Coke (output y) using one input, sugar (X). Coke is valued at price P in the
market, and the price ofsugar is w. His production function isy = f(X) = alnX , where or > 0. (Q po'nts) a. What is the PMP (proﬁt maximization problem)? b. What is the factor demand function, X (P, w) i? 0. Taking a partial derivative, show that the output of Coke increases when the market price of
Coke rises. A ﬁrm makes a product with the production function y = 2X 1 + 3X2. Input prices are wI = 1 and w2 : 2. What is the solution of the CMP (cost minimization problem) for 3—2 = [2 ? (Please circle one response.)
a. X] = 6. 11’: = 0 b. X1=0,X3=4
c. Xi=4,X3=O
d X,=3_.X3=2 A ﬁrm makes a product with the production function y = min{2XI ,3X2}. Input prices are wI :1 and w3 = 2 . “hat is the solution ofthe CMP (cost minimization problem) for y = 12 ? (Please circle one
response.)
a. X 6
b. X 4
0. X126,
d. X 0 Which of the following expressions is the average profit (Le. proﬁt per unit output)? (Please circle one response.)
a. AC MC
b. MCAVC
c. AVC—AC
d. MCAC
e. AVC—MC ...
View Full
Document
 Fall '08
 NINKOVIC
 Microeconomics

Click to edit the document details