Essay
Suppose that a hypothetical economy has the following relationship between its real domestic output and the input quantities necessary for producing that level of output. 
(a) What is the level of productivity in this economy?
(b) What is the unit cost of production if the price of each input is $2.00?
(c) If the input price decreases from $2 to $1.50, what is the new per unit cost of production? What impact would this have on the short-run aggregate supply curve?
(d) Suppose that instead of the input price decreasing, the productivity had increased by 25%.What will be the new unit cost of production? What impact would this change have on the short-run aggregate supply curve?
Correct Answer:
Verified
(a) The level of productivity is 2 outpu...View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q11: What is the aggregate demand curve? What
Q12: What is the effect on the multiplier
Q13: Suppose the aggregate demand and short-run aggregate
Q14: Is the downward price inflexibility applicable to
Q15: Explain the relationship between the aggregate expenditures
Q17: Suppose the aggregate demand and short-run aggregate
Q19: In the below diagram assume that the
Q20: In the table below are aggregate demand
Q21: How is the long-run aggregate supply curve
Q44: Explain the three reasons given for the