In order to maximize profit, a firm that produces its output in two plants will allocate total output between the two plants so that
A. marginal revenue for the firm is equal to the sum of the plants' marginal costs.
B. marginal cost for the firm is equal to the sum of the plants' marginal costs.
C. marginal cost is equal for the two plants.
D. all of the above
Answer: C
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Tennis balls and tennis rackets are complements. If a 3 percent change in the price of a tennis racket leads to a 9 change in the quantity of tennis balls demanded, the cross elasticity of demand equals
A) 3. B) -3. C) 1/3. D) -1/3. E) 9.
One plausible explanation of the U.S. productivity slowdown starting in 1973 is that it is an artifact of mismeasurement. This explanation would require that production of
A) goods is underestimated. B) goods is overestimated. C) services is underestimated. D) services is overestimated.