Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10 . The marginal product of the seventh unit of labor is 4 . Given this information, what is the average variable cost of production when the firm hires
7 workers?
a. $12.67
b. $11
c. 81 cents
d. 75 cents
d
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The income elasticity of demand for jewelry is 2. Other things equal, a 10% increase in consumer income will ________ the quantity of jewelry demanded by ________
A. decrease; 5%. B. increase; 5%. C. increase; 20%. D. decrease; 20%.
To Keynesians, a vertical aggregate supply curve
A) is nonsensical. B) holds in the short run but not the long run. C) holds in the long run but not the short run. D) will only be encountered at the full-capacity output of the economy.
In the Keynesian aggregate expenditure model, the 45-degree line indicates:
a. amounts households plan to spend at each possible level of income. b. amounts households plan to save at each possible level of income. c. all income levels at which the planned spending of decision makers equals total output. d. all income levels at which the marginal propensity to consume is one.
During rush hours, long lines of traffic clog the only bridge to town. This bridge is an example of
a. market inefficiency b. obligatory controls c. a decreasing externality cost d. a pure public good e. a near public good