Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $15 and the per-unit wage, w, is $5, then the average fixed cost of using 16 units of capital and 25 units of labor is:
A. $9.
B. $56.
C. $12.
D. There is insufficient information to determine the average fixed costs.
Answer: C
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A. inflation rate is greater than the nominal interest rate. B. real interest rate is negative. C. nominal rate of interest is positive. D. real interest rate is positive.
This infrastructure spending is fiscal stimulus.
a. true b. false