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answers 4 - Answers to ECON-314-03/04 ASSIGNMENT 4 1 True...

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Answers to ECON-314-03/04 ASSIGNMENT 4 1. True or false: if the marginal product is decreasing, then the average product must also be decreasing. Explain. Answer: This is false, since AP increases as long as MP is more than AP, or equivalently, the AP-curve climbs up as long as the MP curve is above the AP-curve. 2. Michelle's business produces ceramic cups using labor, clay and a kiln. She can manufacture 25 cups a day with one worker and one kiln, and 45 cups with two workers and two kilns. Does her production function exhibit decreasing returns to scale or diminishing marginal returns? Answer: Michelle's production function exhibits decreasing returns to scale because output is less than doubled after all inputs are doubled. 3. You have an economics final in seven weeks. It will cover both micro and macroeconomics. Each part will be worth 50 points. You have a total of 100 hours that you can spend studying for the exam. For the first 25 hours you spend studying microeconomics, you will get 1 point for each hour of studying. After that, you will get 1 point more for each 3 hours you spend studying, up to the maximum possible of 50 points. Macroeconomics is different. For your first 15 hours of studying you will get 1 point for each 45 minutes you spend studying macro.
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