If labor and capital are complements in production, then an increase in the amount of capital will
a. reduce the firm's demand for labor.
b. raise the firm's marginal cost of production.
c. cause the scale effect to outweigh the substitution effect.
d. increase labor's marginal product.
d. increase labor's marginal product.
You might also like to view...
How is the marginal product of labor calculated? As the firm increases its output, what pattern will we observe in the marginal product of labor and why does it occur?
What will be an ideal response?
In a competitive economy, the questions of what, how, and for whom to produce tend to be regulated by
a. the government. b. businessmen. c. the price system. d. workers.
Suppose that the economy is operating below the full employment level of real GDP. If a liquidity trap exists, a(an) ________ policy would be most effective for solving the problem.
A. expansionary monetary policy B. contractionary fiscal policy C. expansionary fiscal policy D. contractionary monetary policy
You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by $400 billion. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend?
A. reduce the budget deficit by $400 billion B. reduce taxes by $100 billion and increase government purchases by $50 billion C. increase government purchases by $100 billion D. reduce taxes by $100 billion