If a government has a budget deficit, it must
A) decrease its expenditures.
B) borrow in the loanable funds market.
C) decrease taxes.
D) increase taxes.
E) lower the real interest rate.
B
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Refer to Figure 21-1. Which of the following is consistent with the graph depicted above?
A) Households become spendthrifts and begin to save less. B) An expected recession decreases the profitability of new investment. C) The government runs a budget surplus. D) Technological change increases the profitability of new investment. Figure 21-2
Clarke Mementos manufactures small figurines that they sell to retailers around the country. Clarke sells the figurines for $5.00 each, a price the firm considers given. Clarke's production function is given by the expression:
Q = 60L - 0.5L2, where Q = number of figurines per day, and L = number of skilled workers per day. Based on this production function, the average and marginal products of labor are as follows: AP = 60 - 0.5L MP = 60 - L a. Write an expression for the firm's marginal revenue product. b. Clarke currently pays $150 per day (including fringe benefits) for each of its skilled workers. How many workers should the firm employ? c. Clarke's workers are highly skilled artisans with a great deal of job mobility. The firm's managers fear that they must increase the workers' total compensation to $200 per day to remain competitive. What impact would the wage increase have upon the firm's employment?