Suppose the production function for T-shirts can be represented as q = L0.25K0.75. Show that the marginal productivity of labor diminishes in the short run
What will be an ideal response?
In the short run, MPL = 0.25 ? (q/L). The change in MP with respect to L equals d(MPL)/dL = -0.25 ? q/L2. Thus, for all levels of labor hired, MPL falls as L increases.
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Opportunity cost is illustrated in a production possibilities frontier (PPF) by a movement
A) from the region within the PPF to a point on the PPF. B) from the region within the PPF to the region outside of the PPF. C) from the region outside of the PPF to a point on the PPF. D) along the PPF where to gain more of one good it is necessary to give some of another good.
Budget surpluses exist when: a. government spending exceeds its tax revenues
b. government tax revenues exceed its spending. c. government spending equals its tax revenues. d. expansionary fiscal policies increase real GDP and the price level.