Suppose a firm uses labor and capital to produce output. The last unit of labor hired has a marginal product of 12 units of output, and the last unit of capital employed has a marginal product of 20 units
Use the optimal combination of inputs rule to calculate the price of capital if the price of labor is $6 per unit. The price of capital is
A) $2.
B) $10.
C) $20.
D) impossible to determine with the information given.
B
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Suppose that ABC Industries, a perfectly competitive firm, currently produces 500 units of imitation ham spread for a total cost of $1,500 . The marginal cost of the 500th unit is $20, and the marginal revenue of the 500th unit is $15 . To maximize profits, Cheapo Industries should:
a. continue to produce 500 units. b. produce more than 500 units but less than 1500 units. c. produce less than 500 units. d. produce more than 1500 units. e. stop producing at 500 units.
If the budget deficit was eliminated, the federal government would have more money than it could spend
a. True b. False Indicate whether the statement is true or false