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Sample Midterm 2

Sample Midterm 2 - Econ 251x Marshall School of Business...

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Econ 251x Akbulut Marshall School of Business Sample Questions for Midterm 2 (The midterm will have 35 questions, you have only 30 questions here.) 1. A firm has a production process in which the inputs to production are perfectly substitutable in the long run. In this example, the marginal rate of technical substitution (MRTS) is a. constant but otherwise unknown without information about the marginal product of each input. b. constant and equal to one. c. high and increasing due to increasing marginal returns. d. low but otherwise unknown without information on input prices. Figure 1 2. Refer to Figure 1 . Which of the following statements is false? 3. Can an isoquant ever slope upward?
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4. Which of the following is not a characteristic of a competitive market? 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).
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