Principles of Microeconomic Theory 1: Problem Set 6

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Principles of Microeconomic Theory 1: Problem set 6.

part A：Multiple choice questions.

Question 1. suppose that a irm,s short-run production function has the property that, for all input levels, the marginal product of labour is greater than the average product of labour. which one of the following must be true?

(a) APL is a strictly increasing function of L.

(b) APL is a strictly decreasing function of L.

(c) MPL is a strictly increasing function of L.

(d) MPL is a strictly decreasing function of L.

(e) None of the above.

Question 2. suppose that airm,s long-run production function is homogeneous of degree 2. Then, a 30% increase in all inputs leads to which one of the following?

(a) No change in output.

(b) output increases by 2%.

(c) output increases by 60%

(d) output increases by 69%.

(e) output increases by 30%.

Question 3. suppose that airm,s long-run production function is f  = LaKβ .  It is esti- mated that a = 0.65 and β = 0.21. which one of the following is false?

(a) The long-run production function is homogeneous of degree 0.86.

(b) The long-run production function exhibits decreasing returns to scale.

(c) Increasing all inputs by 20% leads to a 17% increase in output.

(d) Increasing all inputs by 30% leads to a 25% increase in output.

(e) Increasing all inputs by 50% leads to a 35% increase in output.

part B: written answer question.

Question 4. suppose that a irm,s long-run production function is given by:

q =（“L + “K )2

Explain and calculate the elasticity of substitution.


2023-08-28