A business is employing inputs such that the marginal product of labor is 40 and the marginal product of capital is 90. The price of labor is $20 and the price of capital is $30. If the business wants to minimize costs while keeping output constant, then it should:
A. Use more labor and less capital
B. Use less labor and less capital
C. Use less labor and more capital
D. Make no change in resource use
C. Use less labor and more capital
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How does the text define economic efficiency? Is this an absolute or a relative definition? Would another type of definition be preferable? Why or why not?
If a 10 percent increase in income induced a group of consumers to reduce their yearly purchases of eggs by 5 percent, for these consumers,
a. the income elasticity of eggs equals approximately 1.05. b. the income elasticity of eggs is 0.5. c. eggs are a luxury good. d. eggs are an inferior good.
Suppose the U.S. and Japan can both produce airplanes and televisions and the U.S. has a comparative advantage in the production of airplanes while Japan has a comparative advantage in the production of televisions. Also suppose the U.S. has an absolute advantage in the production of both airplanes and televisions. The U.S. should
a. not trade airplanes or televisions with Japan. b. import airplanes from Japan and export televisions to Japan. c. export airplanes to Japan and import televisions from Japan. d. export both airplanes and televisions to Japan.
A plumber who specializes in cleaning plugged sewer lines is typically paid a higher wage than a plumber who works on installing water systems in new residential housing. Which of the following would push the wages of plumbers who work on sewer lines higher?
a. Plumbers who work on new residential housing require more training than plumbers working on sewer lines. b. Plumbing jobs that involve sewer lines are likely to have a high element of personal satisfaction. c. Plumbers who work with sewer lines are more likely to work the day shift. d. plumbers who work with sewer lines are likely to be perceived as having a "dirty" job.