A firm is making a long-run planning decision. It wants to decide on the optimal size of plant and labor force. It is considering building a medium-sized plant and hiring 100 workers
Engineering estimates suggest that at those levels, the marginal product of capital will be 100 and the marginal product of labor will be 75. If the wage rate is $5 and the rental rate on capital is $10, is the firm making the right decision? Support your answer.
No, the firm is not making the right decision. Minimizing cost (maximizing output) requires that (MPL/w) = (MPK/r). 100/10 < 75/5, so the firm should plan to build a smaller plant and employ more workers, all other things equal.
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Why is a dollar today more valuable than a dollar a year from now?
A) The unknown future is riskier than the known present. B) The dollar today can be immediately used to buy something. C) A dollar a year from now will likely have less purchasing power because of inflation. D) all of the above
Most studies indicate that during the last two decades, the wages of union members have been approximately
a. 5 percent higher than the wages of similar nonunion workers. b. 14 to 19 percent higher than the wages of similar nonunion workers. c. 34 to 39 percent higher than the wages of similar nonunion workers. d. 64 to 69 percent higher than the wages of similar nonunion workers.
In 2012 the federal budget was almost
A. 1 million pages long. B. 17 pages long. C. 1,300 pages long. D. 500 pages long.
In the medium run, an increase in the rate of growth of nominal money will cause
A) lower nominal and lower real interest rates. B) lower nominal interest rates and no change in the real interest rate. C) an increase in inflation and an increase in output growth. D) a proportionate increase in inflation.