Historical note concerning U.S. price levels: During the 1970s, with the onslaught of OPEC oil price increases
a. inflation occurred and it was primarily cost-push
b. inflation was approximately zero because the Vietnam war ended and the demand for military goods fell dramatically
c. deflation was persistent
d. inflation occurred and it was primarily demand-pull
e. stagflation, the difference between inflation and deflation, was approximately zero
A
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Marginal benefit is the benefit ________ one more unit of the good and ________ of the good increases
A) of producing; increases as production B) of producing; decreases as production C) from consuming; increases as consumption D) from consuming; decreases as consumption
Evren wants to go into the donut business. For $500 per month he can rent a bakery complete with all the equipment he needs to make a dozen different kinds of donuts (K = l, r = 500). He must pay unionized donut bakers a monthly salary of $400 each
He projects his monthly production function to be Q = 5KL where Q is tons of donuts. a. With the current level of capital, what is the marginal product of labor? Is the marginal product diminishing? Explain. b. If Evren wishes to make 25 tons of donuts, how many bakers are required given the current level of capital? How much will it cost to produce this (total cost)? c. Derive Evren's short-run cost function with K=1. d. Derive the marginal cost curve from your answer to c. and show the relationship between the marginal cost and marginal product of labor.