A firm is currently hiring capital and labor so that MPL/PL > MPK/PK. If the firm wishes to maximize profits it should hire
A. less labor and less capital.
B. less labor and more capital.
C. more labor and less capital.
D. more capital and more labor.
Answer: C
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Answer the next question based on the following payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. Firm A? High PriceLow PriceFirm BHigh priceA = $250A = $325??B = $250B = $200?Low priceA = $200A = $175??B = $325B = $175If firm B adopts the high-price strategy, then firm A would adopt the
A. low-price strategy and earn $325. B. high-price strategy and earn $250. C. high-price strategy and earn $200. D. low-price strategy and earn $175.
Suppose that in Slovakia one unit of labor can produce either 16 tons of wheat or 32 tons of soy and in Poland one unit of labor can produce either 4 tons of wheat or 2 tons of soy. Given this information, which of the following statements is true?
A. Slovakia has a comparative advantage in producing neither wheat nor soy. B. Slovakia has a comparative advantage in producing both wheat and soy. C. Poland has a comparative advantage in producing soy but not wheat. D. Poland has a comparative advantage in producing wheat but not soy.
When the economy is operating at the equilibrium level of GDP, we know that
A) total planned real consumption expenditures equal real GDP. B) planned real investment spending equals real net exports of zero. C) total planned real expenditures equal real GDP. D) real net exports equal inventory changes.
Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will
a. increase less than will the consumer price index. b. increase more than will the consumer price index. c. not increase, but the consumer price index will increase. d. increase, but the consumer price index will not increase.