MGEB02H3 Study Guide - Midterm Guide: University Of Toronto Scarborough, Production Function, Variable Cost
16 Oct 2018
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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] as production increases from 400 to 450 for the firm whose production is illustrated below: The inputs both increased by 15% times while the output increased by 12. 5%, (from 400 to. Therefore the production exhibits diseconomies of scale or decreasing returns to scale. 5 2 + q: [5 points] a firms 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 3: (6 points) suppose the cost of labour (w) has increased but the cost of capital (r) has remained constant. Show graphically, the effect of this change on the expansion path of your firm.
