ECP3704 LATEST EXAMS EVALUATION
QUESTIONS AND ANSWERS SURE A+
✔✔You are an efficiency expert hired by a manufacturing firm that uses K and L as
inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and
MPK = 40 the firm:
Is cost minimizing
Should use less L and more K to cost minimize
Should use more L and less K to cost minimize
Is profit maximizing but not cost minimizing - ✔✔Should use more L and less K to cost
minimize
✔✔K - ✔✔Capital
✔✔L - ✔✔Labor
✔✔Long Run VS Short Run - ✔✔Short Run means that there are factors which are
fixed, and can not be changed by management. In the Long Run all factors are variable,
there are no fixed factors.
✔✔Production Function - ✔✔The maximum amount of output that can be produced with
K and L.
✔✔Linear Production Functions - ✔✔Inputs are perfect substitutes
✔✔Leontief Production Functions - ✔✔Inputs are used in fixed proportion
✔✔Cobb-Douglas Production Function - ✔✔Inputs have a degree of substitutability.
✔✔Marginal Product of Labor - ✔✔Change in Q/Change in L
Measures the output produced by the last unit of Labor
, ✔✔Marginal Product of Capital - ✔✔Change in Q/Change in K
Measures the output produced by the last unit of Capital
✔✔Transitive Property - ✔✔If A>B and B>C then A>C.
✔✔Completeness Property - ✔✔Consumer is capable of expressing their preferences
between bundles.
✔✔ Joe prefers a three pack of soda to a six-pack. What properties does this
preference violate?
Completeness
Transitivity
More is better
Diminishing MRS - ✔✔More is better
✔✔When the price of one good increases, the associated income effect is represented
by a move from one indifference curve to a
Lower indifference curve since real income is now higher
Lower indifference curve since real income is now lower
Higher indifference curve since real income is now higher
Higher indifference curve since real income is now lower - ✔✔Lower indifference curve
since real income is now lower
✔✔When the price of one good decreases, the associated substitution effect is
represented by a
Move from one indifference to a higher indifference curve since real income is now
higher
Move from one indifference to a lower indifference curve since real income is now
lower
Move along a given indifference curve holding real income constant
Move along a given indifference curve since real income increases - ✔✔Move along a
given indifference curve holding real income constant
✔✔The substitution affect isolates the change in the consumption of a good caused by:
The lower "real" income
The change in the relative prices of two goods
The change in consumer preferences
None of the statements associated with this question are correct - ✔✔The change in
the relative prices of two goods
✔✔Given that income is $750 and PX = $32 and PY = $8, what is the market rate of
substitution between goods X and Y?
-0.75
-3
-4
QUESTIONS AND ANSWERS SURE A+
✔✔You are an efficiency expert hired by a manufacturing firm that uses K and L as
inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and
MPK = 40 the firm:
Is cost minimizing
Should use less L and more K to cost minimize
Should use more L and less K to cost minimize
Is profit maximizing but not cost minimizing - ✔✔Should use more L and less K to cost
minimize
✔✔K - ✔✔Capital
✔✔L - ✔✔Labor
✔✔Long Run VS Short Run - ✔✔Short Run means that there are factors which are
fixed, and can not be changed by management. In the Long Run all factors are variable,
there are no fixed factors.
✔✔Production Function - ✔✔The maximum amount of output that can be produced with
K and L.
✔✔Linear Production Functions - ✔✔Inputs are perfect substitutes
✔✔Leontief Production Functions - ✔✔Inputs are used in fixed proportion
✔✔Cobb-Douglas Production Function - ✔✔Inputs have a degree of substitutability.
✔✔Marginal Product of Labor - ✔✔Change in Q/Change in L
Measures the output produced by the last unit of Labor
, ✔✔Marginal Product of Capital - ✔✔Change in Q/Change in K
Measures the output produced by the last unit of Capital
✔✔Transitive Property - ✔✔If A>B and B>C then A>C.
✔✔Completeness Property - ✔✔Consumer is capable of expressing their preferences
between bundles.
✔✔ Joe prefers a three pack of soda to a six-pack. What properties does this
preference violate?
Completeness
Transitivity
More is better
Diminishing MRS - ✔✔More is better
✔✔When the price of one good increases, the associated income effect is represented
by a move from one indifference curve to a
Lower indifference curve since real income is now higher
Lower indifference curve since real income is now lower
Higher indifference curve since real income is now higher
Higher indifference curve since real income is now lower - ✔✔Lower indifference curve
since real income is now lower
✔✔When the price of one good decreases, the associated substitution effect is
represented by a
Move from one indifference to a higher indifference curve since real income is now
higher
Move from one indifference to a lower indifference curve since real income is now
lower
Move along a given indifference curve holding real income constant
Move along a given indifference curve since real income increases - ✔✔Move along a
given indifference curve holding real income constant
✔✔The substitution affect isolates the change in the consumption of a good caused by:
The lower "real" income
The change in the relative prices of two goods
The change in consumer preferences
None of the statements associated with this question are correct - ✔✔The change in
the relative prices of two goods
✔✔Given that income is $750 and PX = $32 and PY = $8, what is the market rate of
substitution between goods X and Y?
-0.75
-3
-4
