MGEB02H3 Study Guide - University Of Toronto Scarborough, Isoquant, Mitsubishi Triton

541 views16 pages

Document Summary

Instructions: this is a closed book test, only calculator is allowed. Question-1 [35 points] answer the following short questions: [5 points] the following two isoquants cannot represent different output levels from the same production function. Allocation b and allocation c have to produce the same amount because they both produce the similar to allocation a. However, that violates the efficiency requirement as allocation c uses similar amount of capital but more labor than allocation b and yet produces the same amount. q* Page 2 of 16: [6 points] refer to the following figure. Return to scale, (b) diminishing marginal product of labour. Solution: doubling the input will less than double the output. Therefore, the production exhibits decreasing returns to scale. (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.