ECON 3305: Take-home Questions for Exam 2

ECON 3305:  Take-home Questions for Exam 2

One question from the list will be on the actual exam. This question is worth 20 points. Since you do not

know which question will be on the actual exam, you MUST type up the answers for both questions in

advance.  Makes sure you type your name on the each essay answer.

Here is my advice: Do NOT play a Russian roulette with your course grade; make sure you take your time to

write up the answers in details.  To answer properly, these questions require minimum one-third to a half

page, single-space, font size 12.

Below is the list of the questions. The first question is my own, and the second question comes from your

textbook.

(1)  How does capital investment affect the marginal physical product of labor?  Does more college

education have the same kind of effect?  Which is a better investment?

(2)  Make sure you really explain your answer. If you wish, you can also include an example while

explaining your answer in detail.

According to the rule for optimal input usage, a firm should hire a person as long as her marginal revenue

product is greater than her marginal cost to the company. It is well known that many companies have

management training programs in which new trainees are paid relatively high starting salaries and are not

expected to make substantial contributions to the company until after the program is over (programs may run

between 6 to 18 months). In offering such training programs, is a company violating the optimality rule?

Explain.