MGEB02H3 Study Guide - University Of Toronto Scarborough, Average Variable Cost, Variable Cost
12 May 2014
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Instructions: this is a closed book test, only calculator is allowed. Question-1 [30 points] answer the following short questions: [5 points] refer to the following figure. (a) find two marginal products for labour (mpl) and comment on them. (b) comment on returns to scale. Page 2 of 15: [5 points] a firm s total cost function is given by the equation: Find the cost-output elasticity of this firm and explain whether the firm"s production is characterized by increasing returns to scale, decreasing returns to scale, or constant returns to scale. Page 3 of 15: (6 points) you own a factory. The wage rate has gone down but the rental price of capital (interest rate) has remained constant. Show graphically, the effect of this change on the expansion path of your firm. Page 4 of 15: [8 points] suppose a firm s technology is given by q = min{l,4k}.
