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?
Definitions:
Low Price
A cost that is relatively lower than the average or expected market price of a product or service.
Nash Equilibrium
A concept in game theory where each player's strategy is optimal, given the strategies of all other players, resulting in a stable outcome where no player has an incentive to deviate.
Simultaneous Move Game
A type of strategic game in which all players make their decisions at the same time without knowledge of the other players' choices.
Efficient
An economy is efficient if all assets are employed in their highest-valued uses.
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