Name: ________________________ Student #: ___________________

ID: B

ECON2350B S2 2015 July 28 Midterm 15:00-17:00

Note: This exam includes 15 Multiple Choice Questions.
Identify the choice that best completes the statement or answers to the question. Only one answer is allowed to choose.
Otherwise there is no mark for the question.
You have 120 minutes to complete all of them and fill your answer on you scantron.
Only a basic calculator is allowed during exam; no other electronic devices.
____

1. The production function is given by F(L) 6L2/3. Suppose that the cost per unit of labor is $16 and the price
of output is $8. How many units of labor will the firm hire?
a. 4
b. 8
c. 24
d. 16
e. None of the above.

____

2. A competitive firm has a long-run total cost function c(y) 2y2 288 for y 0 and c(0) 0. Its long-run
supply function is described as
a. y p/2 if p 53, y 0 if p 43.
b. y p/4 if p 51, y 0 if p 51.
c. y p/2 if p 46, y 0 if p 46.
d. y p/4 if p 48, y 0 if p 48.
e. y p/2 if p 51, y 0 if p 54.

____

3. A competitive firm uses two inputs and has a production function

. The firm can buy as much of either factor as it likes at factor prices w1 w2 $1. The cost of producing y
units of output for this firm is
a. 2(y/8)2.
b. y2/16.
c. (x1 x2)/8.
d. y/16.
e. 8(x1 x2)y.

____

4. A competitive firm has the short-run cost function c(y) 2y3 16y2 128y 10. The firm will produce a
positive amount in the short run if and only if the price is greater than
a. $192.
b. $48.
c. $99.
d. $96.
e. $95.

Name: ________________________

ID: B

____

5. The bicycle industry y is made up of 100 firms with the long-run cost curve c(y) 2 (y2/2) and 60 firms
with the long-run cost curve c(y) y2/10. No new firms can enter the industry. What is the long-run industry
supply curve at prices greater than $2?
a. y 400p.
b. y 435p.
c. y 300p.
d. y 200p.
e. y 420p.

____

6. A firm has the production function f(x1, x2)

equation
a. x2 30x-0.501.
b. x2 30x-21.
c. x1 0.50x-0.502.
d. x2 30x21.
e. x1/x2 2.

____

7. A firm has the production function f(x1, x2) (xb1 xb2)c, where b 0 and c 0. This firm will have
a. increasing returns to scale if and only if 2b c 1.
b. constant returns to scale if and only if c 1.
c. increasing returns to scale if and only if b c 1.
d. increasing returns to scale if and only if bc 1.
e. constant returns to scale if and only if b c.

____

8. The demand for a monopolists output is 3,000/(p 2)2, where p is the price it charges. At a price of $3, the
elasticity of demand for the monopolists output is
a. 1.10.
b. 2.10.
c. 1.20.
d. 2.60.
e. 1.

____

9. If output is produced according to Q 4LK, the price of K is $10, and the price of L is $40, then the cost
minimizing cost minimizing combination of K and L capable of producing 64 units of output is
a. L 32 and K 32.
b. L 2 and K 8.
c. L 16 and K 1.
d. L 1 and K 16.
e. L 2 and K 2.

. The isoquant on which output is 30 5/10 has the

Name: ________________________

ID: B

____ 10. A firm has the production function Q X1/21X2. In the short run it must use exactly 35 units of factor 2. The
price of factor 1 is $105 per unit and the price of factor 2 is $3 per unit. The firms short-run marginal cost
function is
a. MC(Q) 105Q-1/2.
b. MC(Q) 105 105Q2.
c. MC(Q) 3Q.
d. MC(Q) 35Q-1/2.
e. MC(Q) 6Q/35.
____ 11. When Farmer Hoglund applies N pounds of fertilizer per acre, the marginal product of fertilizer is 1 N/200
bushels of corn. If the price of corn is $2 per bushel and the price of fertilizer is $0.40 per pound, then how
many pounds of fertilizer per acre should Farmer Hoglund use in order to maximize his profits?
a. 160
b. 320
c. 200
d. 84
e. 328
____ 12. A firm has the long-run cost function C(Q) 4Q2 64.In the long run, it will supply a positive amount of
output, so long as the price is greater than
a. $16.
b. $64.
c. $32.
d. $37.
e. $72.
____ 13. A profit-maximizing monopolist faces a downward-sloping demand curve that has a constant elasticity of 4.
The firm finds it optimal to charge a price of $24 for its output. What is its marginal cost at this level of
output?
a. $24
b. $10
c. $48
d. $18
e. $55
____ 14. A firm has a production function f(x, y) 1.40(x0.60 y0.60)2 whenever x 0 and y 0. When the amounts of
both inputs are positive, this firm has
a. increasing returns to scale.
b. increasing returns to scale if output is less than 1 and decreasing returns to scale if output
is greater than 1.
c. decreasing returns to scale.
d. constant returns to scale.
e. increasing returns to scale if x y 1 and decreasing returns to scale otherwise.

Name: ________________________

ID: B

____ 15. An orange grower has discovered a process for producing oranges that requires two inputs. The production
function is Q min2x1, x2, where x1 andx2 are the amounts of inputs 1 and 2 that he uses. The prices of
these two inputs are w1 $5 and w2 $2,respectively. The minimum cost of producing 140 units is therefore
a. $700.
b. $280.
c. $1,400.
d. $630.
e. $980.

ID: B

ECON2350B S2 2015 July 28 Midterm 15:00-17:00

Answer Section
MULTIPLE CHOICE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.

ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:

B
D
A
D
A
A
D
C
B
E
A
C
D
A
D

PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

DIF:
DIF:
DIF:
DIF:
DIF:

1
2
2
3
2

DIF: 2
DIF: 2
DIF: 1
DIF: 2
DIF: 1
DIF: 2
DIF: 1