What two factors determine labor productivity? Explain which of the two is more important
What will be an ideal response?
The capital-labor ratio and total factor productivity determine labor productivity. Total factor productivity is more important because the production function displays diminishing marginal returns for the capital-labor ratio, but diminishing marginal returns do not apply to total factor productivity.
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Suppose prices of personal computers fall significantly and consumers respond by buying more personal computers. The consumer price index
a. reflects this price decrease accurately. b. understates this price decrease due to the substitution bias. c. overstates this price decrease due to the income bias. d. overstates this price decrease due to the substitution bias.
The concept of diminishing marginal utility:
A. explains why individuals rarely maximize their total utility. B. is the change in total utility that comes from consuming one additional unit of a good or service. C. is the principle that the additional utility gained from consuming successive units of a good or service tends to be smaller than the utility gained from the previous unit. D. is the principle that the additional utility gained from consuming different bundles of goods and services tend to be smaller than the utility gained from consuming just one bundle of goods and services.