After a firm makes both short and long run adjustments in its production plan following a reduction in the wage,
A. the marginal product of labor will be higher.
B. the marginal product of labor will be lower.
C. the marginal product of capital will be unchanged.
D. the marginal product of capital may be higher or lower depending on the degree of substitutability between capital and labor.
E. (a) and (c)
F. (a) and (d)
G. (b) and (c)
H. (b) and (d)
Answer: G
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The concavity or bowed-out shape of the production possibilities frontier is the result of
A. the law of downward-sloping demand. B. the law of upward-sloping demand. C. the principle of increasing cost. D. complementarity in consumption.
When the principle of comparative advantage is used to guide trade, then a country specializes in producing only
A) goods with the highest opportunity cost. B) goods with the lowest opportunity costs. C) goods for which production takes fewer worker-hour than another country. D) goods for which production costs are more than average total costs.
The supply of loanable funds curve reflects
a. the inverse relationship between the market interest rate and the quantity of borrowed funds b. the inverse relationship between the market interest rate and the quantity of saving c. the direct relationship between the market interest rate and the quantity of borrowed funds d. the direct relationship between the market interest rate and the quantity of saving e. the direct relationship between the market interest rate and the quantity of present consumption
Deposits that banks keep on hand rather than lend out or invest are known as: a. reserves
b. securities. c. loans. d. bonds.