In the following production function, Y = f(K, NA), suppose A increases by 20%. This 20% increase in A implies that
A) the same output can be produced with 20% less labor.
B) the effective quantity of labor has increased by 20%.
C) output will increase by less than 20%.
D) all of the above
E) both A and C.
D
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In the long run, all factors of production are
A) variable. B) fixed. C) materials. D) rented.
Happy Cows is a dairy farm that is currently earning $75,000 in economic profit. The managers of Happy Cows are considering adding a second dairy farm, which will generate an additional $30,000 in economic profit. It is economically sound for the managers of Happy Cows to add the second farm if, after accounting for the managerial diseconomies, the first farm's economic profits exceed ________.
A) $35,000 B) $30,000 C) $45,000 D) $25,000
Chaletland should _____ interest rates during a recession and _____ interest rates during an economic boom in order to maintain long-run equilibrium.
A) Increase; increase B) Decrease; decrease C) Decrease; increase D) Increase; decrease
The price elasticity of demand measures
A) changes in demand. B) how responsive market prices are to a change in demand. C) how responsive consumers are to a change in price. D) how responsive consumers are to a change in income.