The menu cost theory suggests that
A) wages and prices move freely and quickly.
B) the economy is characterized only by perfect competition.
C) there will be no unemployment.
D) firms find frequent price changes to be costly.
D
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Open market sale of government securities results in:
A) an increase in bank reserves. B) a decrease in bank reserves. C) a decrease in interest rates. D) none of the above.
With its current levels of input use, a firm's MRTS is 3 (when capital is on the vertical axis and labor is on the horizontal axis). This implies
A) the firm could produce 3 more units of output if it increased its use of capital by one unit (holding labor constant). B) the firm could produce 3 more units of output if it increased its use of labor by one unit (holding capital constant). C) if the firm reduced its capital stock by one unit, it would have to hire 3 more workers to maintain its current level of output. D) if it used one more unit of both capital and labor, the firm could produce 3 more units of output. E) the marginal product of labor is 3 times the marginal product of capital.