If the inputs to a production process are perfect substitutes and the marginal rate of technical substitution is equal to the ratio of the prices of the two inputs, the firm can choose from a virtually infinite array of combinations of the two inputs
to minimize the costs of producing a given level of output. Indicate whether the statement is true or false
TRUE
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If an economy is producing efficiently, then
a. there is no way to produce more of one good without producing less of another good. b. it is possible to produce more of both goods without increasing the quantities of inputs that are being used. c. it is possible to produce more of one good without producing less of another good. d. it is not possible to produce more of any good at any cost.
When interest rates rise, farm profits
A) Increase because the value of farm assets varies directly with interest rates. B) Decrease because the value of farm assets varies directly with interest rates. C) Decrease because interest rates represent a major cost for farm production. D) Are not affected.
Market failure can be caused by
a. too much competition. b. externalities. c. low consumer demand. d. scarcity.
Assume a two-country, two-good, two-input model where the following relationships hold:(K/L)U.S. > (K/L)ROW(K/L)automobiles > (K/L)shoes (K/L)U.S. is the capital-labor ratio in the United States, (K/L)ROW is the capital-labor ratio in the Rest of the World, (K/L)automobiles indicates the capital-labor ratio in the production of automobiles, and (K/L)shoes indicates the capital-labor ratio in the production of shoes.Assume further that technology and tastes are the same in the United States and the Rest of the World. The relationships shown here indicate that, with no trade, in the United States
A. the relative labor endowment is higher than in the Rest of the World. B. the price of shoes relative to automobiles is lower than in the Rest of the World. C. the relative capital endowment is the same as in the Rest of the World. D. the price of automobiles relative to shoes is lower than in the Rest of the World.