Name:

Student #:

ECON2350A S2 2015

July 27 Midterm 18:00-20:00

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. A firm has the production function f(x, y) = 60x 4/5 y1/5. The slope of the firms isoquant at the point
(x, y) =
(40, 80) is (pick the
closest one) a.
0.50.
b. 4.
c. 0.25.
d. 8.
e. 0.25.
2. A firm has the production function f(x1, x2) = x0.601x0.302. The isoquant on which output is
803/10 has the equation
a.
x2
= 80x2
. b.
1
x2
= 80x3
.33
.
1
c.
d.

x1/x2 = 2.
x2

= 80x0.30
. e.
1
x1
= 0.30x0.70
.
2
3. A firm has a production function
whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has
a. decreasing returns to scale.

ID:

b.

constant returns to scale.

c.

Name:
d.
e.

Student #:

increasin
g returns
to scale if

x + y > 1 and decreasing returns to scale otherwise.

increasing returns to scale.
increasing returns to scale if output is less than 1 and decreasing returns to
scale if output is greater than 1.

4. A competitive firms production function is f(x1, x2) = 8x1/21 + 8x1/22. The price of factor 1 is $1
and the price of factor 2 is $3. The price of output is $6. What is the profit-maximizing quantity
of output?
a. 256
b. 512
c. 252
d. 516
e. 244

ID:

Name:

5. When Farmer Hoglund applies N pounds of fertilizer per acre, the ID:
marginal product of fertilizer is 1 N/200 bushels of corn. If the price of corn is $4 per bushel and the price
of fertilizer is $1.20 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in
order to maximize his profits?
a. 140
b. 280
c. 74
d. 288
e. 200

6. An orange grower has discovered a process for producing oranges that requires two inputs. The production
function is Q = min{2x1, x2}, where x1 and x2 are the amounts of inputs 1 and 2 that he uses. The prices
of these two inputs are w1 = $5 and w2 = $10, respectively. The minimum cost of producing 160 units is
therefore
a. $2,000.
b. $2,400.
c. $800.
d. $8,000.
e. $1,600.
7. The production function is f (L, M) = 4L1/2M1/2, where L is the number of units of labor and M is the number
of machines. If the amounts of both factors can be varied and if the cost of labor is $64 per unit and the cost
of using machines is $1 per machine, then the total cost of producing 20 units of output is
a. $80.
b. $650.
c. $20.
d. $320.
e. $40.
8. A competitive firm has the short-run cost function c(y)= 2y3 16y2 + 64y + 50. The firm will produce a
positive amount in the short run if and only if the price is greater than
a. $16.
b. $64.
c. $32.
d. $35.
e. $31.
9. A firm has the production function Q = X1/21X2. In the short run it must use exactly 15 units of factor 2. The
price of factor 1 is $75 per unit and the price of factor 2 is $2 per unit. The firms short-run marginal cost
function is
a. MC(Q)
= 10Q/15. b.
MC(Q) = 30Q1/2.
c. MC(Q) = 30 + 75Q2.
d. MC(Q) = 2Q.
e. MC(Q) = 15Q1/2.

10. A firm has the long-run cost function C(Q) = 4Q2 + 196. In the long run, it will supply a positive amount of
output, so long as the price is greater than
a. $120.
b. $112.
c. $56.
d. $28.
e. $61.
11. A competitive firm has a long-run total cost function c(y) = 3y2 + 675 for y > 0 and c(0) = 0. Its long-run
supply function is described as
a. y = p/6 if p > 90, y = 0 if p < 90.
b. y = p/3 if p > 88, y = 0 if p < 88.
c. y = p/3 if p > 93, y = 0 if p < 99.
d. y = p/6 if p > 93, y = 0 if p < 93.
e.
y = p/3 if p > 95, y = 0 if p
< 85.
12. 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/39)2.
b. 39(x1 + x2)y.
c.

(x1

+ x2)/39. d.
y/78.
e. y2/78.
13. The bicycle industry 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 = 420p.
b. y = 400p.
c. y = 200p.
d. y = 300p.
e.
y
= 435p.
14. The demand for a monopolists output is 6,000/(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.
b. 2.20.
c. 1.20.
d. 1.70.
e. 0.70.

15. A monopolist faces a constant marginal cost of $1 per unit. If at the price he is charging, the price elasticity of
demand for the monopolists output is 0.5, then
a. the price he is charging must be $2.
b. the price he is charging must exceed $2.
c. the price he is charging must be less than $2.
d. the monopolist cannot be maximizing profits.
e. the monopolist must use price discrimination.