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? a. At point C the marginal product of labor is increasing. b. At point C the marginal product of labor is positive. c. At point C the average product of labor is decreasing. d. At point C the average product of labor is positive. 3. Can an isoquant ever slope upward?
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a. No. It would imply that adding more of both inputs keeps output constant. b. Yes. If both inputs are inferior, then the isoquant is upward sloping. c. Yes. Where diminishing returns occur, the isoquant is upward sloping. d. No. It would imply that adding more of both inputs decreases output. 4. Which of the following is not a characteristic of a competitive market? a. Buyers and sellers are price takers. b. Each firm sells a virtually identical product. c. Free entry is limited. d. Each firm chooses an output level that maximizes profits. 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). 6. 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 0.4 M 0.8 . This production function exhibits a. decreasing returns to scale for all output levels. b.
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This note was uploaded on 04/04/2012 for the course ECON 351 taught by Professor Rahşanakbulut during the Spring '12 term at USC.

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

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