Describe how marginal costs and marginal product are related and give an example.
What will be an ideal response?
They should explain that there is an inverse relationship between marginal costs and marginal product. When marginal product falls, marginal costs rise. When marginal product rises, marginal costs fall. An example might be a team of window washers. One window washer cannot make efficient use of all the equipment in his truck. Adding another washer to the team will lead to a large increase in the number of windows washed per hour. Once the truck’s equipment is operating at full capacity, however, adding more team members will yield very little increase in windows washed per hour, driving down the marginal product and increasing the marginal cost.
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Suppose that Arnold spends all his income on bratwursts and piano lessons and his marginal utility per dollar on bratwursts is lower than that on piano lessons. Is Arnold maximizing his utility? Why or why not?
What will be an ideal response?
Which one of the following individuals would be classified as structurally unemployed?
A) Joe was laid off by by his construction company because there was a reduction in the number of houses built in the winter. B) Gail lost her job with the state because there was a reduction in the state budget. C) Tommy lost his job when the steel mill where he worked was closed because domestic producers would not produce as efficiently and cheaply as foreign firms. D) Fay lost her job in early January when the Christmas store where she worked was closed.
Economists probably agree more often than they disagree
a. True b. False Indicate whether the statement is true or false
People are forced to make choices because of:
A. unlimited wants and unlimited resources. B. limited wants and unlimited resources. C. unlimited wants and limited resources. D. limited wants and limited resources.