Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10 . The marginal product of the seventh unit of labor is 4 . Given this information, what is the marginal cost of production when the firm hires the 7th
worker?
a. $1.50
b. $2.50
c. $5
d. $10
b
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The Oh So Humble Bakery sells 300 muffins at a price of $1 per muffin. Its explicit costs for producing 300 muffins are $250. If the bakery is earning a normal rate of return, then implicit costs must be
A. $50. B. $100. C. $250. D. $350.
"The Big Mac index is The Economist's burger-based measure of whether currencies are over- or undervalued.... [E]xchange rates should eventually adjust to make the price of a basket of goods the same in each country
Our basket contains just one item: the Big Mac hamburger, which is pretty much the same around the world." The Economist, July 28, 2012 Which principle is The Economist relying on when using the Big Mac to value exchange rates? A) interest rate parity B) market price parity C) purchasing power parity D) exchange rate parity
Suppose that the price of a Big Mac is a good approximation of the price level in the country. A Big Mac costs £2 in London and $3 in New York
a) If purchasing power parity holds, what is the exchange rate between the U.S. dollar and the British pound? b) If the current exchange rate is $1.6 per pound, what is the dollar price of a Big Mac in London? What do you predict will happen to the exchange rate? Explain. c) The exchange rate between the U.S. dollar and the Russian ruble is 30 rubles per dollar. If purchasing power parity holds, what is the price of a Big Mac in Moscow?
The supply curve represents the relationship between:
A. price and quantity supplied with everything else held constant. B. income and quantity supplied with everything else held constant. C. consumer preferences and quantity supplied with everything else held constant. D. income and price supplied with everything else held constant.