Suppose two goods (X and Y ) are being produced efficiently and that the production of X is always more labor intensive than the production of Y. Production depends only on two factors (capital and labor); these may be smoothly substituted for each other. The total quantities of these inputs are fixed. An increase in the production of X and a decrease in the production of Y will
a. increase the capital-labor ratio in each firm.
b. decrease the capital-labor ratio in each firm.
c. leave the capital-labor ratio for each firm unchanged.
d. increase the capital-labor ratio in Y production and decrease the capital-labor ratio in X production.
a
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Assume the market for ball bearings is purely competitive. Currently, each of the firms in this market is making a positive level of economic profits. In the long run, we can expect the market:
A. supply to increase. B. supply to decrease. C. demand to decrease. D. demand to increase.
Refer to the information provided in Figure 27.3 below to answer the question(s) that follow.
Figure 27.3Refer to Figure 27.3. Assume the economy is currently at Point A on aggregate supply curve AS1. A decrease in inflationary expectations that causes firms to decrease their prices
A. moves the economy to Point C on aggregate supply curve AS1. B. moves the economy to Point B on aggregate supply curve AS1. C. shifts the aggregate supply curve to AS0. D. shifts the aggregate supply curve to AS2.