Sam's company produces output with labor and capital. At the current quantities of labor and capital, the following information is obtained: the output produced by spending one more dollar on labor exceeds the output produced by spending one more
dollar on capital. In the long run, is Sam minimizing costs? If not, explain how capital and labor should change (holding output constant) and how this relates to the condition.
The last dollar rule is not satisfied. He should spend more on labor and less on capital. At this point, MRTS > w/r.
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Which of the following statements is likely to be made by someone who believes in the new growth theory?
A) Population growth will limit long-run gains in real GDP per person. B) Competition will encourage discoveries of new ideas leading to greater economic growth. C) Choices made by human capital are likely to be inefficient. D) Economic growth will eventually slow. E) Although technological changes increase real GDP, these changes are random and unexplainable.
The concept of choosing the least-cost combination of resources for a given amount of output is known as
a. technical efficiency. b. the principle of diminishing marginal returns. c. economic efficiency. d. decreasing returns to scale.
If an asset has a present value of $50 and appreciates at an interest rate of 4%, what is the asset's future value in 47 compounding periods?
A) Approximately $400 B) Approximately $316 C) Approximately $137 D) Approximately $1143
Assume that a firm's marginal cost is $10 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately
A) $20. B) $5. C) $10. D) The answer cannot be determined without additional information.