Suppose capital and labor are perfect substitutes resulting in a production function of q = K + L. That is, the isoquants are straight lines with a slope of -1
Derive the long-run total cost function TC = C(q) when the wage rate is w and the rental rate on capital is r.
The firm will always hire the input that is cheapest. So the function is
If w < r, TC = wq.
If w > r, TC = rq.
If w = r, either equation works.
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Which of the following is not a way to become officially unemployed?
a. Quit your job to look for a better job in another part of the country. b. Be fired from your job. c. Look for a job after being out of the civilian labor force for five years. d. Retire. e. Look for a job only for the period in the summer that you are out of school.
Suppose people anticipate inflation will be 3 percent during the next several years. If this is true, when the real interest rate is 4 percent, what will be the nominal (money) interest rate?
What will be an ideal response?
An effective price floor will:
A. force some firms in this industry to go out of business. B. result in a product surplus. C. result in a product shortage. D. clear the market.
Refer to the data below. Assume that Wat originally produced rice and corn at combination C and that Xat originally produced combination B. If the nations now fully specialized based on comparative advantage, the total gains from specialization and trade are:
Answer the following question based on the data provided in the tables below for two hypothetical nations, Wat and Xat. The nations have the production possibilities for rice and corn given in the following table:
A. 25 units of rice and 25 units of corn
B. 50 units of rice and 50 units of corn
C. 100 units of rice and 100 units of corn
D. 100 units of rice and 150 units of corn