If a firm hires one worker and eliminates four units of capital, and hires one more worker and replaces three more units of capital, keeping output constant, then
A) workers and capital are perfect substitutes.
B) the firm is operating inefficiently because capital is more efficient than workers.
C) the firm is experiencing a diminishing marginal rate of technical substitution.
D) there are decreasing returns to scale.
C
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Refer to the above figure. Suppose the original long-run equilibrium was at point B. What could have caused the move to the current equilibrium?
A) Aggregate demand must have decreased. B) Input prices must have increased, causing long-run aggregate supply to increase. C) Decreases in the price level caused short-run aggregate supply to fall. D) A temporary reduction in production due to bad weather.
The gap between Federal expenditures and Federal revenues after 1980 was caused primarily by
A) the recessions which occurred in the 1980s. B) a substantial decrease in Federal revenues. C) a substantial increase in Federal expenditures. D) rising interest rates which made caused investment and growth to collapse.