# Midterm Exam Solution Essay

1542 WordsMar 13, 20137 Pages
Name__________________ ID _______________________ Midterm Exam MBA501 There are 25 multiple choice questions and each question is worth 3 points. 1) Until recently you worked as an accountant, earning \$30,000 annually. Then you inherited a piece of commercial real estate bringing in \$12,000 in rent annually. You decided to leave your job and operate a video rental store in the office space you inherited. At the end of the first year, your books showed total revenues of \$60,000 and total costs of \$30,000 for video purchases, utilities, taxes, and supplies. What is the total economic cost of operating the video store? A. \$60,000 B. \$42,000 C. \$30,000…show more content…
the consumer is willing to give up some of good X to get an additional unit of good Y to achieve a higher level of satisfaction. Answer A) 14) Under the buy one, get one free regime, the A. budget line rotates counter-clockwise. B. Budget line shifts outward in a parallel fashion. C. Opportunity set expands. D. indifference curve is changed. Answer C. 15) Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is \$4 and the price of capital is \$2, then in order to minimize costs the firm should use A. more capital and less labor. B. more labor and less capital. C. three times more capital than labor. D. none of the statements associated with this question are correct. Answer: B 16) Suppose the production function is Q = min {K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed? A. 2. B. 4. C. 8. D. 9. Answer: C 17) Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed? A. 3. B. 4. C. 7. D. 45. Answer C. 18) Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 10 units of capital and 10 units of labor are employed? A. 3. B. 4. C. 11. D. 45. Answer A. 19) For the cost function C(Q) = 100 + 2Q + 3Q2, the total variable