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
Q1: Differentiate between "demand-pull" and "cost-push" inflation using
Q4: What is the difference in the explanation
Q8: Economists think of three different aggregate supply
Q13: Suppose the aggregate demand and short-run aggregate
Q14: Is the downward price inflexibility applicable to
Q18: In the below diagram assume that the
Q24: The determinants of aggregate demand "determine" the
Q30: Using the aggregate demand-aggregate supply (short-run) model,
Q32: How can an economy already at full-employment
Q34: How is the short-run aggregate supply curve