At the XYZ Co, a unit of capital costs three times as much as a unit of labor. If MPK = 10, MPL = 5, then this firm
A) is minimizing its cost at current output level.
B) should use more capital and less labor to raise output at current cost.
C) should use less capital and more labor to raise output at current cost.
D) None of above.
C
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The process by which identical products that are tradeable converge to the same price is called
A) arbitrage. B) hedging. C) speculation. D) risk aversion.
Suppose lawn mowers are part of the market basket used to compute the CPI. Suppose also that the quality of lawn mowers deteriorates while the price of lawn mowers stays the same. If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality, then, other things equal,
a. the CPI will rise. b. the CPI will fall. c. the CPI will stay the same. d. lawn mowers will no longer be included in the market basket.