In the following graph, the price of labor is $15 per unit. Which of the following combinations of capital and labor lies on the expansion path?
A. 18K, 40L
B. 21K, 60L
C. 30K, 100L
D. 15K, 40L
E. none of the above
Answer: A
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If the supply of a good decreases and it causes total revenue to increase, this shows that the good has an
A) inelastic demand. B) elastic demand. C) unit elastic demand. D) inelastic supply. E) elastic supply.
Why does a profit-maximizing firm hire labor up to the point where the value of marginal product equals the wage rate?
What will be an ideal response?
Continuing with the same family from the preceding question, suppose a risk neutral insurance company exists to provide vacation insurance. Suppose further that each vacation day requires a constant expenditure, and this expenditure is standard across everybody. This allows us to simplify the problem by considering all payments to be in terms of vacation days. What is the least the insurance
company would charge (in terms of vacation days)? a. 1 b. 2 c. 3 d. 4
Which of the following best describes a Nash equilibrium?
A. An outcome from which one or both competitors can improve their position by adopting an alternative strategy. B. The unstable outcome of a repeated game. C. An outcome that is stable only because of credible threats. D. An outcome that both competitors see as optimal, given the strategy of their rival.