A linear specification, Q = aK + bL, is not appropriate for estimating a production function because

A. the firm could produce positive levels of output at zero cost.
B. the marginal products of the inputs are assumed constant.
C. it does not allow the firm to substitute capital for labor.
D. both b and c
E. all of the above


Answer: B

Economics

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Suppose Winston's annual salary as an accountant is $60,000, and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. To run the business, he outlays $8,000 in cash to cover all the costs involved with running the business, and earns revenues of $150,000. What costs would be considered when calculating economic profit?

A. The opportunity cost of his job and interest forgone of $64,000, and the explicit cost of $8,000 B. The implicit cost of the interest forgone of $4,000 and the explicit cost of $8,000 C. The explicit cost of $8,000 D. The implicit cost of his job of $60,000 and the opportunity cost of forgone interest of $4,000

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Which of the following causes the production possibilities curve to shift to the right?

a. d and e. b. c and e. c. A war. d. The development of a new technology that improves productivity. e. The discovery of oil reserves.

Economics

Some countries win in international trade, while other countries lose

a. True b. False Indicate whether the statement is true or false

Economics

An economist advising a central bank intending to reduce the inflation rate would likely point out that

a. the costs of reducing inflation persist and the costs of reducing it do not depend on the public's inflation expectations. b. the costs of reducing inflation persist, but they are smaller if the public reduces its inflation expectations. c. the costs of reducing inflation are temporary and the costs of reducing it do not depend on the public's inflation expectations. d. the costs of reducing inflation are temporary and the costs are smaller if the public reduces its inflation expectations.

Economics