## Exam Information

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## Sample Document Text

EXAM 3
INTERMEDIATE MICROECO'OMIC THEORY
~16<'
Fall 1991 November 21, 1991
Mr. Meredith
Please answer ~!ll questions in the exam booklet provided.
PART 1
1. Define and state the importance of the following terms:
a) Technical rate of substitution
b) Condition.ll factor demand functions
c) Producer siurplus
d) Production set
e) Homogem!ity
PART 2
Please answer the following questions.
2. A firm uses labor and capital to produce output according to the production function
f(K,L)=3K
l12
L
l12
, where K is the number of units of capital and L is the number cf units
of labor. The cost of labor is P
L
and the cost of capital is P
K
.
a) write both the profit maximization relation and the cost minimization relation.
i.e., what is the equation you would optimize in each situation?
b) what is thf~ slope of the isocost line?
c) using cost minimization, find the optimal values of K and L that you would
use to produce y units of output.
d) derive the cost function an...

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