Assuming that labor is the only variable input with a fixed production facility, explain the relationship between the marginal product of labor and the marginal production cost.
What will be an ideal response?
The marginal product of labor is the change in output from one additional worker. Suppose the marginal product of labor decreases as more workers are added to the production. It implies that output will increase at a decreasing rate because the additional contribution to the output from an additional worker becomes smaller. In other words, an additional output becomes more costly as more output is produced. Thus diminishing marginal returns lead to an increase in marginal cost.
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Competition is present when
What will be an ideal response?
Suppose a consumer has an income of $16, the price of A is $2, and the price of B is $1. Which combination is on the consumer's budget line?
A. 6A and 5B B. 8A and 16B C. 4A and 9B D. 5A and 6B
When demand is inelastic
A. the proportional change in quantity demanded is equal to the proportional change in price. B. quantity demanded is very responsive to a change in price. C. quantity demanded is not very responsive to a change in price. D. producers react quickly to price changes.
Using rate-of-return analysis to determine who benefits and who does not benefit from the current structure of Social Security is
A. embraced by all. B. embraced not only by financial planners but also by most economists. C. rejected by those that view the program as social insurance rather than as an investment. D. rejected by everyone.