ECON 231D: Managerial Economics

Test 3 (20 Marks) Time: 90 Minutes Date: 05.12.2022

Name of the Student:

There are two sections in the question paper. The section A is objective and there are 4
questions comprises 0.5 marks each. In Section B, subjective questions are there and each
questions carries 3 marks each. There are six questions in the Section B and you need to
attempt all the 6 questions from Section B. Read the instructions carefully and draw the
diagram or assumptions wherever is asked for. Wish you all the best.

Section A: Objective Questions (0.5 marks each)

1.) The short run is

A) Less than a year.

B) A time period in which both inputs have been fixed.
C) However long it takes to produce the planned output.
D) A time period in which at least one input is fixed.

2.) If input prices are constant, a firm with increasing returns to scale can expect

A) Costs to double as output doubles.

B) Costs to more than double as output doubles.
C) Costs to go up less than double as output doubles.
D) To hire more and more labor for a given amount of capital, since marginal product
increases.
E) To never reach the point where the marginal product of labor is equal to the wage.

3. When the total output is at maximum, the marginal product of labour

A) At its maximum
B) At its minimum
C) The marginal product of labour become negative
D) The marginal product of labour is zero (0)
 4.) The price of cloth and quantity of cloth traded are P and Q , respectively. Given this
information, consumer surplus is the area:

A) BCQ
B) ABC
C) ACP
D) CBP

Section B: Descriptive questions (3 marks each)

1. Write down the production function with one variables. Establish the relationship among
marginal product of labour and the production function.
2. Draw the derivations for Shut Down and Exit discussed?
3. What do you mean by output elasticity of labour? Give an example for output elasticity of
labour.
4. Draw the competitive firm’s Short run supply curve. Explain it with a diagram.
5. How SRATC and LRATC are related. Draw a diagram and explain.

Quantity of Total output Marginal product of Average product of

variable input variable input variable input
0 0

1 215

2 300

3 300

4 1140

5 225

6 225
6. Please fill the blank columns left