What is the relevance of the marginal productivity principle in explaining the use of inputs in production?
According to the marginal productivity principle, when factor markets are competitive, it always pays a profit-maximizing firm to hire the amount of any input that makes the marginal revenue product equal to the price of the input.
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Suppose the Fed changes the interest rate in an attempt to raise planned investment. But in spite of this, planned investment remains unchanged. The most likely explanation is that
A) we have moved downward along an unchanged rate-of-return line. B) we have moved upward along an unchanged rate-of-return line. C) the rate-of-return line has shifted to the left. D) the rate-of-return line has shifted to the right.
Assume that, given factors of production and existing knowledge and technology, it is not possible to produce more of one good without foregoing the opportunity to produce some of another good. Economists would characterize this situation as: a. inefficient
b. efficient. c. due to unemployment. d. a point outside the production possibilities frontier.