MGEB02H3 Study Guide - Midterm Guide: University Of Toronto Scarborough, Production Function, Forego
16 Oct 2018
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Instructions: this is a closed book test, only calculator is allowed. Question-1 [35 points] answer the following short questions: [6 points] refer to the following figure. What can you say about (a) economies of scale or. Solution: doubling the input will less than double the output. Therefore, the production exhibits decreasing returns to scale. Therefore, the production exhibits disceconmies of scale: mpl is declining since - for instance - if we keep k at 2 the slope of the isoquant declines, implying a declining mpl. Page 2 of 2: [5 points] a firms total cost function is given by the equation: tc = 4000 + 5q + 10q2. Find this firm output elasticity of cost and use it to identify its returns to scale. Page 3 of 3: [5 points] the following two isoquants cannot represent different output levels from the same production function.
