"If the wage rate paid to one form of labor is twice the cost of another form of labor, the first type of labor must be twice as productive." Comment
What will be an ideal response?
This is true. Firms minimize cost by setting the ratio of marginal productivity per unit cost equally across all inputs. If one form of labor is twice as expensive as another, the firm will want the MP of the first type of labor to be twice that of the second.
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Figure 5-5 shows a consumer budget line for French fries and hamburgers. If the household has $20 to spend, the price of hamburgers is
A. $1. B. $2. C. $4. D. $2.50.
In competitive markets, surpluses or shortages will
A. cause changes in the quantities demanded and supplied that tend to eliminate the excess production or excess demand. B. cause shifts in the demand and supply curves that tend to eliminate the excess production or excess demand. C. cause changes in the quantities demanded and supplied that tend to intensify the excess production or excess demand. D. never exist because the markets are always at equilibrium.