Suppose that the production of wheat requires two inputs, labor and fertilizer. The price of labor is $4.50 and the price of fertilizer is $3.00. A farmer is currently employing the inputs such that the marginal product of labor is 11 and the marginal product of fertilizer is 8. If the farmer is a cost-minimizer, he should:
A. Use more labor and less fertilizer
B. Use more fertilizer and less labor
C. Use more labor and more fertilizer
D. Continue using the same amounts of each input
B. Use more fertilizer and less labor
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We measure gross domestic product by multiplying the quantities of goods by their prices because it allows us to
A) calculate the total number of units of goods produced in an economy. B) correct for inflation. C) directly compare the output of one economy to that of another. D) express the values of products in a common unit of measurement.
In Figure 5-18, point D for the consumer
A. will be chosen because total utility is larger there than at point C. B. would not be chosen because it is less desirable than point C. C. is unattainable, given the consumer’s budget. D. has total utility equal to point C.
Refer to Figure 26-14. In the figure above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could the Federal Reserve use to move the economy to point C?
A) sell Treasury bills B) decrease income taxes C) buy Treasury bills D) increase the required-reserve ratio
If an economy is growing at 2 percent a year but its rate of technology growth is 1 percent a year, then this country must be:
a. below its steady state level of capital per worker. b. expected to grow slower in the future. c. has a savings rate that is too low. d. none of the above.