Suppose a firm employs only capital and labor as inputs. Explain how the firm should allocate its inputs in order to maximize profits in a perfectly competitive market
What will be an ideal response?
To maximize profits, the firm should allocate the two inputs so that the marginal revenue product (MRP) of each of the two inputs equals its input price, i.e., the MRP of capital equals the price of capital (cost per unit of service), and the MRP of labor equals the price of labor (wage rates).
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An increase in the economic output of a society is known as ______.
a. efficiency b. scarcity c. consumerism d. growth
What are some criticisms of the CPI as a measure of inflation?
What will be an ideal response?
Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. Which of the following counter-arguments is made by economists who oppose trade restrictions?
A) Trade restrictions have a limited impact because most Americans prefer domestic goods over imports. B) Consumers pay a high cost for jobs saved through trade restrictions. C) Trade restrictions benefit consumers in the short run but not in the long run. D) Statistics show that trade restrictions actually do not save jobs.
The effect of trade on specialized employees of import-competing industries will be ________ jobs and ________ pay because they are relatively ________
A) fewer; lower; immobile B) fewer; lower; mobile C) more; lower; immobile D) more; higher; mobile E) more; higher; immobile