ECON 1110 Lecture Notes - Lecture 20: Nominal Interest Rate, Consumption Function, Real Interest Rate
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Gdp depends on: quantity of inputs (factors of production, ability to turn inputs into outputs factors of production: input most important are land, labor. K & l are fixed economy has set amount assumption: factors are fully utilized capital & labor fully employed. Y = f(k,l) increases in tech increased output w/ same resources production function has constant returns to scale proportional increase of output given increase in resources. Distribution factor prices: amount paid to factor of production labor paid wages capital paid rental rate competitive firms have little influence on mkt prices many sellers in mkt little control price-taker of output & input profit=revenue-labor costs-capital costs profit=f(k,l)-wl-rk. Mpl: marginal product of labor extra output firm gets by increasing labor one unit. Mpl = f(k,l+1)-f(k,l) diminishing marginal product: mpl decreases as l increases over time extra revenue=mpl*p firm stops hiring when mpl*p=w. If production function is constant returns to scale then economic profit is 0.
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The law of eventually diminishing marginal returns: (Points : 1)
a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y d. None of the above |
b. the marginal rate of technical substitution c. equal to MPx/MPy d. all of the above e. none of the above |
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained d. a and b e. a and c |
b. variable cost c. marginal rate of technical substitution d. total cost e. none of the above |
b. the average product of labor (L) is equal to ?2 c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent d. a and b e. a and c |
b. relevant to decisions in which one or more inputs to the production process are fixed c. not relevant to optimal pricing and production output decision facilities d. crucial in making optimal investment decisions in new production facilities e. none of the above |
b. all inputs are considered variable c. some inputs are always fixed d. capital and labor are always combined in fixed proportions |
A linear total cost function implies that: (Points : 1) |
b. average total costs are continually decreasing as output increases
c. a and b
d. none of the above