If the value of marginal product of a factor of production exceeds the price of the factor, the
A) firm should hire more of that factor.
B) firm should hire less of that factor.
C) firm is maximizing profits.
D) firm should shut down.
A
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Firms exit a competitive market when they incur an economic loss. In the long run, this exit means that the economic losses of the surviving firms
A) increase. B) decrease until they equal zero. C) decrease until economic profits are earned. D) do not change. E) might change but more information is needed about what happens to the price of the good as the firms exit.
The Hardboard Construction Company hired Bob at $10 an hour, but its output of doll houses only increased by three units a day. Two weeks later, the company purchased an $8 hammer for Bob and output increased by twelve units. Since the hammer increased
the marginal product more than Bob did, and at less cost, Hardboard fired Bob. Is this consistent with the theory of marginal productivity? Why or why not?
In terms of efficiency, trade diversion is a _____ desirable outcome of a regional free-trade agreement, because trade is diverted from the ___________ producer to the __________ producer .
a. more; high-cost; low-cost b. more; less deserving; more deserving c. less; low-cost; high-cost d. less; foreign; domestic
Assume that foreign capital flows from a nation increase due to political uncertainly and increased risk. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and monetary base in the context of the Three-Sector-Model? a. The real risk-free interest rate falls and monetary base falls
b. The real risk-free interest rate rises and monetary base falls. c. The real risk-free interest rate and monetary base remain the same. d. There is not enough information to determine what happens to these two macroeconomic variables.