What is the relationship between marginal cost and marginal product?
a. The two are not related.
b. When marginal product increases, marginal cost increases.
c. When marginal product increases, marginal cost falls.
d. When marginal product is negative, marginal costs are negative.
e. When diminishing marginal returns set in, marginal costs fall.
C
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Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If the last worker hired produces four units of output per hour, then to maximize profits the firm should
A) hire another worker. B) not change the number of workers it currently hires. C) lay off some workers. D) There is not enough information to answer the question.
The decline in output at the onset of the Great Depression was caused primarily by
a. a positive demand shock b. a negative demand shock c. a positive supply shock d. a negative supply shock e. simultaneous shocks to supply and demand
Government polices aimed at changing the underlying structure or institutions of the nation's economy are called:
A. fiscal policy. B. structural policy. C. trade policy. D. monetary policy.
The theory of comparative advantage suggests that nations should produce a good if they:
a. have the lowest opportunity cost. b. have the lowest wages. c. have the most resources. d. can produce more of the good than any other nation.