MGEB02H3 Study Guide - University Of Toronto Scarborough, Average Variable Cost, Production Function
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. Mpl is declining as expected: doubling the inputs (from (2,2) to (4,4)) will more than double the output (from 40 to 90). Therefore, the production exhibits increasing returns to scale. (or economies of scale) 20 2 : [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. We found where ac=mc (crs) and identified irs if produced less and drs if produced more. Page 3 of 16: (6 points) you own a factory.
