A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 10 bushels. What would you advise this farmer to do?
A. Reduce the product price so that the wage and marginal revenue product will be equal.
B. Increase employment because the wage paid is less than the marginal revenue product.
C. Do nothing because the wage rate and the marginal product of the last worker hired are equal.
D. Reduce employment because the wage paid is less than the marginal revenue product.
Answer: B
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Reserves $500 million Loans $3,500 million Deposits $4,000 million Total assets $5,000 million The banks hold no excess reserves. a) Calculate the banks' desired reserve ratio. b) An immigrant arrives in Fundland with $10 million, which she deposits in a bank. How much does the immigrant's bank lend initially?
The marginal propensity to consume is defined as
A) the change in consumption divided by the change in disposable income. B) the change in disposable income divided by the change in consumption. C) consumption divided by disposable income. D) disposable income divided by consumption.
The activists' paradise requires
A) that government expenditures follow a fairly steady growth path. B) the ability to forecast perfectly future changes in demand and effects of changes in policy. C) policy to have powerful direct effects but no side-effects. D) B and C are both correct.
When Joe maximizes utility, he finds that his MRS of X for Y is greater than Px/Py. It is most likely that:
A) Joe's preferences are incomplete. B) Joe's preferences are irrational. C) Joe is not consuming good X. D) Joe is not consuming good Y.