A firm combines two resources, X and Y, to produce an output level Q in a purely competitive market. The cost of a unit of X is $20 and the cost of a unit of Y is $4. The marginal product of X is 100 units and the marginal product of Y is currently 16
units at output level Q. What would you recommend that the firm do given this resource combination?
What will be an ideal response?
The firm can reduce the cost of production by changing the mix of resources X and Y. The least costly method of production is determined by finding the equality of the ratio of the marginal product to price for the resources. In this case, the firm should use more X and less Y because currently the marginal productivity per dollar of resource spent on Y yields less than the marginal productivity per dollar spent on X (100/$20 > 16/48, or 5 > 4).
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If a monopoly is price discriminating between two groups, A and B, based on observable customer characteristics, there is a difference in the marginal cost of selling to the two groups, and the elasticity of demand for group A is -1.5 while the elasticity of demand for group B is -2.1, which of the following is true?
A. The markup and price for group A customers will be higher than for group B customers. B. The markup and price for group B customers will be higher than for group A customers. C. The markup for group A customers will be higher than for group B customers, but there is not enough information to determine which price will be higher. D. The price for group A customers will be higher than for group B customers, but there is not enough information to determine which markup will be higher.
Lisa runs a local flower shop, if it rains on Valentine's Day and she opens the shop, she will lose $200. If it does not rain on Valentine's Day, she will earn $500 dollars as profits
The chance of rain is 30%, the standard deviation of the profits Lisa could earn on Valentine's Day is A) 198.17. B) 135.61. C) 432.43. D) 290.
Scarcity is a result of an unfair distribution of income
a. True b. False Indicate whether the statement is true or false
Economists usually use the term "recession" to refer to:
A. any slowdown in the growth of real GDP. B. zero real GDP growth. C. two or more consecutive quarters of declining real GDP. D. a reduction in nominal GDP lasting more than six months.