An increase in the saving rate in a steady-state economy would cause
A. a rightward movement along the saving-per-worker curve and an increase in the capital-labor ratio.
B. a downward shift in the saving-per-worker curve and a decrease in the capital-labor ratio.
C. an upward shift in the saving-per-worker curve and an increase in the capital-labor ratio.
D. a leftward movement along the saving-per-worker curve and a decrease in the capital-labor ratio.
Answer: C
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The Keynesian short-run aggregate supply curve is horizontal because
A) it represents Say's law. B) it reflects wage and price inflexibility. C) it represents the full employment level of real GDP. D) it reflects the absence of money illusion.
A monopsony maximizes its profit by hiring the level of employment that sets
A) labor supply equal to labor demand. B) the value of marginal product equal to the wage. C) the value of marginal product equal to the marginal cost of labor. D) the value of marginal product equal to the demand for labor.
In the short run, a profit-maximizing firm in a price-taker market will definitely stop production if
a. economic profit is zero. b. price falls below average total cost. c. price is less than average variable cost. d. it cannot completely cover its fixed costs.
Answer the following questions true (T) or false (F)
1. The slope of the production possibilities curve is called the marginal rate of technical substitution. 2. The slope of an isoquant is called the marginal rate of product transformation. 3. The shape of the long run average cost curve is typically U-shaped in practice.