Several years ago while teaching in Russia, I was using a production function like the ones used in this text. Output is a function of labor, capital and technology. One professor asked me how I could talk about production without including all the inputs that go into the process. Write a response to this professor from what you know of a production function.You should focus on the concept of value added production.
What will be an ideal response?
While intermediate goods do enter production processes, they are not part of the production generated by the process under consideration. A car assembly plant performs the assembly function in building cars. Its value added is far from the total value of the car. Therefore, the total product in production functions is only that amount generated by the labor and capital expended in that particular process.
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Indicate whether the statement is true or false
The flaw of the Friedman model of the business cycle is that it
A) assumes away output fluctuations. B) assumes complete wage rigidity. C) assumes unrealistic fooling of workers. D) requires procyclical wage movements and continuous labor market equilibrium.
A good salesperson can sell $100,000 worth of goods, while a poor one can sell only $10,000 worth of goods. Job applicants know if they are good or bad, but the firm does not
A firm will offer job applicants a choice between a fixed salary of $2,000 or a commission on the sale. Assume risk-neutral salespersons and no opportunistic behavior. Given that the firm wants to distinguish a prospective good salesperson from a poor one, what should be the commission on sales? A) Commission should be larger than 50%. B) Commission should be larger than 40%. C) Commission should be between 2% and 20%. D) Commission should be smaller than 2%.
If a good is normal, then the Engel curve:
A. slopes upward. B. slopes downward. C. is vertical. D. is horizontal.