If the value of the marginal product of physical capital is $20 and the value of the marginal product of labor is $5, the highest price that a firm should pay for an additional unit of physical capital is:
A) $4.
B) $5.
C) $20.
D) $100.
C
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If the tax multiplier is -1.5 and a $200 billion tax increase is implemented, what is the change in GDP, holding everything else constant? (Assume the price level stays constant.)
A) a $133.33 billion increase in GDP B) a $133.33 billion decrease in GDP C) a $30 billion increase in GDP D) a $300 billion decrease in GDP E) a $300 billion increase in GDP
Explain how free international trade tends to lead to factor price equalization under the assumptions of the HO model. What does this process predict about which groups should be in favor of or opposed to free international trade?
What will be an ideal response?
Refer to Figure 6.6. What area represents the compensation for reduced consumption that results from an increase in the price of gasoline from $1.75 to $3.00 per gallon?
A. a + b
B. a + b + e
C. c + d + e
D. d + e
Suppose that wage contracts between workers and employers are based on an expected inflation rate of 3 percent and a 5 percent increase in money wages is agreed upon. If inflation actually equals 7 percent, real wages
What will be an ideal response?