A producer is hiring 20 units of labor and 6 units of capital (bundle A). The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20. The producer
A. should use more labor and less capital.
B. is using the optimal combination of capital and labor.
C. should use more capital and less labor.
D. cannot determine without more information.
Answer: C
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Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. Jamaica’s opportunity cost of one cooler is
In the long run, exchange rates
a. are determined by business cycle fluctuations b. are determined by movements of hot money c. will adjust until the price of a bundle of goods is the same in both countries d. will reflect economic fluctuations in both countries e. are still a mystery to most economists
Which of the following is most consistent with the basic postulate of economics: changes in incentives exert a predictable impact on human behavior?
What will be an ideal response?
The problem portrayed by the short-run Phillips curve is that:
A. inflation tends to increase when unemployment falls. B. changes in the composition of the labor force tend to increase the natural rate of unemployment. C. stagflation is unavoidable. D. unemployment tends to increase when prices are rising.