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econ 2350 midterm passpaper Page 1 econ 2350 midterm passpaper Page 2 econ 2350 midterm passpaper Page 3
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ECON2350 O 2014W First Midterm Feb 3, 2014 2:30pm-3:50pm

Note: This exam includes 8 Multiple Choice Questions. Identify the choice that best completes the statement or answers to the question. Only one answer is allowed to choose. Otherwise there is no mark for the question. You have 80 minutes to complete all of them and fill your answer on you scantron. Only a basic calculator is allowed during exam; no other electronic devices.

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1. Which of the following production functions exhibit constant returns to scale? In each case y is output and K
and L are inputs. (1) y = K 1 2 L 1 3 . (2) y = 3K 1 2 L 1 2 . (3) y = K 1 2  L 1 2 . (4) y = 2K + 3L. a. 1, 2, and 4 b. 2, 3, and 4 c. 1, 3, and 4 d. 2 and 3 e. 2 and 4

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2. The production function is given by f(x) = 4x 1 2 . If the price of the commodity produced is $60 per unit and the cost of the input is $20 per unit, how much profit will the firm make if it maximizes profits? a. $1,444 b. $705 c. $720 d. $358 e. $363

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3. The production function is f(x1, x2) = x 1 2 1x 1 2 2. If the price of factor 1 is $6 and the price of factor 2 is $12, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits? a. x1 = 12×2. b. x1 = 0.50×2. c. x1 = 2×2. d. x1 = x2. e. We can’t tell without knowing the price of the output.

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4. When Farmer Hoglund 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 $4 per bushel and the price of fertilizer is $1.20 per pound, then how many pounds of fertilizer per acre should Farmer Hoglund use in order to maximize his profits? a. 140 b. 280 c. 74 d. 288 e. 200