When We Solve the Firm's Cost Minimization Problem by the Method

question 58

Multiple Choice

When we solve the firm's cost minimization problem by the method of Lagrange multipliers, the optimal value of the Lagrange multiplier equals the:

• A) marginal product of labor.
• B) marginal product of capital.
• C) marginal cost of production.
• D) cost-output elasticity.

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Definitions:

M2

A measure of the money supply that includes cash, checking deposits, and easily convertible near money, such as savings deposits and money market securities.

M1

A measure of the money supply that includes all physical currency, as well as demand deposits, checking accounts, and other liquid assets easily convertible to cash.

Small Denomination Time Deposits

Time-bound deposit accounts in banks with relatively small deposit requirements, offering fixed interest rates for the duration of the deposit term.

Average Price Level

An economic indicator that shows the overall level of prices for goods and services in an economy over a period.