Suppose firms A and B each make T-shirts. Firm A's production function is q = L0.5K0.5. Firm B's production function is q = 1.2 ? L0.5K0.5
If the two firms each hire the same amounts of capital and labor, compare the two firms in terms of APL and MPL.
Firm B's APL and MPL will equal 1.2 times the APL and MPL of firm A.
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If bundles of goods A and B lie on the same indifference curve, one can assume the individual:
a. prefers bundle A to bundle B. b. prefers bundle B to bundle A. c. enjoys bundle A and B equally. d. bundle A contains the same goods as bundle B.
Answer the following questions true (T) or false (F)
1. College education tends to result in a positive externality because the recipient receives the full benefit of the education. 2. The rising cost of malpractice insurance is one of the leading causes of the increase in health care spending as a percentage of GDP in the United States. 3. "Cost disease" refers to the tendency for low productivity in the service sector to lead to higher costs in those industries.