1. If a consumer views a unit of consumption in period 1 as a perfect substitute (one for one) for a unit of consumption in period 2 and if the real interest rate is positive, the consumer will a. consume only in period 1. consume only in period 2. C consume equal amounts in each period. consume more in period 1 than in period 2 if income elasticity exceeds 1, otherwise consume more in period 2 than in period 1. e. equalize expenditures but not consumption in the two periods. 2. Kenny Kink's utility function is u(c1, C2) = min (c1, c2}, where c1 is his consumption in period 1 and c2 is his consumption in period 2. He earns $200 in period 1 and $220 in period 2. Kenny can borrow and lend at an interest rate of 10%, and there is no inflation. The number of dollars that Kenny spends on consumption in the first period must be more than 200 but less than 220. exactly 200. C . more than 220. exactly 180. e . more than 180 but less than 200. 3. Peregrine consumes ($1,300, $1,320) and earns ($1,000, $1,680). If the interest rate is 0.20, the present value of his endowment is a. $2,400. Mi = 1020 Present value " b. $2, 680. C . $2,620. d. $5,280. e. $6,280 1021 1-14m Ans. A. - 2404 4. A firm has a production function is f(x1, X2) = x1/21x /22. If the fire use 100 units of x1 and 1296 units of x2. The total output this firm will produce is :a. 100 b. 36 360. . 1000 e. 500 '5. The demand for pickles. is given by p = 131 2q and the SUpply is gm\" by p = 5 + 7q. What is the equilibrium quantity? a. 11 - . . 14 - ' ~ : . c. 19 ' 1' ' ., i ' d. 103 -. - . .. " ' ' e None of the above. , " 7, J t . 6. The demand function for fresh strawberries is q 200 4 5p and the supply function is q = 60 + 2p. What is the equilibrium price? . ._,> a. $10 1. .. I} - ..-, i @ / $20 'I- . i t ' ,' '1 1' 0. $40 ' . = . . . ' "'7 (1 $50 ( _. ' If e None of the above. '1 if? . F n ' - \\ ~__ \\ " 7. The demand mction for x is D(p) = 65 - 2p and the supply function is S(p) = 20 + p. The price that should be set to restrict the quantity supplied to 30 units is closest to a. ' less than $ 15 r b. more than $15. (p $15. . d. arbitrary w: .. *7 6. unknown . ' / 8. The inverse demand function for apples is dened by the equation p = 214 - Sq, where q is the number of units sold. The inverse supply function is dened by p = 7 + 4q. A tax of $36 is imposed on suppliers for each unit of apples that they sell. When the tax is imposed, the quantity of apples sold falls to xa. 23. , , P : /b. ' 14. - " 6. 17. j ' " ' l ,; . , @ 19. r. . > - e. 21. I l " 2 9. A firm has a production function f(x, y) = 0.70(x0.80 + 10.80)2whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has a. otherwise. increasing returns to scale if x + y > 1 and decreasing returns to scale increasing returns to scale. C. decreasing returns to scale. d . constant returns to scale. increasing returns to scale if output is less than 1 and decreasing returns to scale if output is greater than 1. 10. The production function is given by F(L) = 6123. Suppose that the cost per unit of labor is $8 and the price of output is 4, how many units of labor will the firm hire? (hint: MPL= 4 [1/3 if you don't know to derive it) a. 16 b. 8 C. 4 d. 24 MEL e. None of the above. 1 1. The production function is given by f(x) = 4x1/2. If the price of the commodity produced is $100 per unit and the cost of the input is $15 per unit, how much profit will the firm make if it maximize profits? ( hint : MP for x is= 2x-1/2). a. $2,666.67 $ 1, 331.33 3943 profit changes4 $ 100 to 648 b . C. $5,337.33 (d. $2,651.67 7622 = 1 / $ 15 to ? 16 e. $1,336.33 12. In Problem 1 1, the production function is f(x1, X2) = x /21x 22. If the price of factor 1 is $4 and the price of factor 2 is $6, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits? a. X1 = X2. b . X1 = 0.67x2. x1 = 1.50x2. We can't tell without knowing the price of output. 2.67 2 e. X1 = 6X2. 313. Farmer Haglund applies N pounds of fertilizer per acre, the marginal product of fertilizer is 1 - N/200 bushels of corn. If the price of corn is $1 per bushel and the price of fertilizer is $.40 per pound, then how many pounds of fertilizer per acre should Farmer Haglund use in order to maximize his profits? a. 64 120 C . 248 240 1 40 e . 200 14. Suppose that in the short run, the firm in Problem 3 which has production function F(L, M) = 41 1/2M /2 must use 9 machines. If the cost of labor is $10 per unit and the cost of machines is $4 per unit, the short-run total cost of producing 60 units of output is a. $420. b . $600. C. $240. $572. $286. 15. Suppose that in the short run, the firm has production function F(L, M) = 41 1/2 M /2 must use 9 machines. If the cost of labor is $5 per unit and the cost of machines is $5 per unit, the short-run average total cost of producing 108 units of output is $9. (b. $4.16 C . $5. d. $40. $10. 16. Suppose that in the short run, the firm in Problem 3 which has production function F(L, M) = 41 1/2M/2 must use 4 machines. If the cost of labor is $10 per unit and the cost of machines is $6 per unit, the short-run total cost of producing 64 units of output is a. $512 b . $384. C. $640. $1,328. e . $664.17.A chemical company has three segmented markets with different price elasticities of demand. Market A is more elastic than Marker B, which is more elastic than Market C. The government imposed a pollution tax on the chemical company. Therefore, what would happen to the consumers in all three markets ? a) Consumers in Market A will pay the highest price than those in Market B, which pay more than those in Market C. b) Consumers in Market B will pay the highest price than those in Market A, which pay more than those in Market C. c) Consumers in Market B will pay the highest price than those in Market C, which pay more than those in Market A. d) Consumers in Market C will pay the highest price than those in Market B, which pay more than those in Market A. e) Consumers in Market C will pay the highest price than those in Market A, which pay more than those in Market C. 18. If the marginal cost of an electronic is $60 and the profit-maximizing price is $ 80, then the price elasticity of demand is a. -2. b . -1.8. -2.33. - 0.25. - 3 . 19. Suppose that in the short run, the firm has production function F(L, M) = 41 1/2M /2 must us 64 machines and 225 units of L. The firm decide to hire -4 times of L and M, then total output in the short run Will be a) 120 b) 240 c) 480 d)600 e) 800 20. Which of the following is true for a firm to reach profit maximization ? a) Marginal product of input x = input price b) Marginal product of input x = input price/ price of product 5