How is the optimal level of input usage to produce a certain output identified with the help of isocosts and isoquants?
Let us assume a firm wants to produce 15,000 units of a good annually. The least-cost combination of inputs can be obtained from the point of tangency between the isoquant depicting an annual output of 15,000 units and the lowest isocost line achievable for this level of production.
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Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to expansionary monetary policy?
a. A higher general level of prices but no change in real output b. A higher general level of prices and an expansion in real output c. No change in the general level of prices and a reduction in real output d. No change in either the general level of prices or real output