Principles of Microeconomic Theory 1: Problem Set 7
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Principles of Microeconomic Theory 1: Problem set 7.
Part A：Multiple choice questions.
Question 1. suppose that airm,s short-run production function q = g(L) has the property that, for all input levels, the marginal product of labour is greater than the average product of labour. There is aixed wage rate w > 0 per unit of labour. which one of the following must be true?
(a) AVC is a strictly increasing function of q.
(b) AVC is a strictly decreasing function of q.
(c) MC is a strictly increasing function of q.
(d) MC is a strictly decreasing function of q.
(e) None of the above.
Question 2. A irm produces output q by employing labour L and capital K. The wage rate for labour is w > 0 and the rental rate for capital is r > 0. suppose that w andr both increase by 50%. which one of the following is true?
(a) The irm,s isocost lines become steeper in factor space.
(b) The irm,s isocost lines become latter in factor space.
(c) The slopes of the irm,s isocost lines are unchanged.
(d) The marginal product of labour decreases by 50%.
(e) The marginal product of capital increases by 50%.
Question 3. suppose that a irm,s long-run production function yields a strictly convex expansion path. which one of the following is true?
(a) The irm,s production function is homogeneous of degree Y > 1.
(b) The irm,s production function is homogeneous of degree Y = 1.
(c) The irm,s production function is homogeneous of degree Y < 1.
(d) The irm,sproduction function is not homogeneous.
(e) None of the above.
Part B: written answer question.
Question 4. A irm,s long-run production function is given by q = Lo.6 ko.3. Explain the cost minimisation problem and the irst-order conditions. Explain the expansion path and derive the irm,s long-run total cost function.
2023-08-29