Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per-unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits the firm should
A. decrease all inputs proportionately.
B. use relatively less capital.
C. use relatively more capital.
D. increase all inputs proportionately.
Answer: B
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A country's government would like to raise the price of one its most important agricultural crops, coffee beans. Which of the following government programs will result in higher prices for coffee beans?
A) An import quota on coffee beans B) An acreage limitation program which provides coffee bean farmers financial incentives to leave some of their acreage idle C) An import tariff on coffee beans D) all of the above
The one thing that all economic models have in common is the
a. emphasis on macroeconomics b. attempt to explain market prices c. analysis of what ought to be d. use of abstraction e. ability to describe economic realities exactly
Perfect competition requires that three conditions be satisfied
a. True b. False Indicate whether the statement is true or false
Which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why
a. a U.S. government bond or a Venezuelan government bond b. a U.S. government bond or a municipal bond with the same term and issued by a creditworthy municipality. c. a 6-month Treasury bill or a 20-year Treasury bond d. a Microsoft bond or a bond issued by a new recording company