EC250 Lecture Notes - Lecture 12: World Bank High-Income Economy, Menu Cost, Demand For Money

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carminelocust688

15 Dec 2017

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Document Summary

Production function bc it is a relationship btwn output and input. Y dash output is determined by the fixed level capital and labour. Given total product, you should be able to calculate the marginal product (the change) Consumption function positive function of disposal income. Interest rate is determined in loanable firms market. Money as a store of value, medium of exchange, unit of account. Fiat money anything that does not have intrinsic value ex. M1 most basic definition of money supply. One to one relationship btwn m and p. Increase m will lead to increase in p. Money demand function directly proportionate to income. Higher as you need more money for a better standard of living. Shoe level cost cost of wasted resources, cause people to reduce amount of money. Menu cost changing menus and catalogues. Money is neutral in the long run. Neutrality of money money has no effect on real variables. Trade is in surplus output will increases.

Related Questions

Consider a Cobb-Douglas production function with three inputs. K is capital, L is unskilled labor, and H is skilled labor:

Y = K^1/3L^1/3H^1/3

Find:

1. The marginal product of unskilled labor

2. The marginal product of skilled labor

3. The marginal product of capital

4. The wage of unskilled labor

5. The wage of skilled labor

6. The ratio of skilled wage to unskilled wage

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

The marginal product is defined as: (Points : 1)

a. the ratio of total output to the amount of the variable input used in producing the output
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

The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)

a. the slope of the isoquant curve
b. the marginal rate of technical substitution

c. equal to MPx/MPy

d. all of the above
e. none of the above

Marginal revenue product is: (Points : 1)

a. defined as the amount that an additional unit of the variable input adds to the total revenue
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

Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)

a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above

In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)

a. the marginal product of labor (L) is equal to ?1
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