Refer to the Following

question 44

Multiple Choice

Refer to the following:

A producer is hiring 20 units of labor and 6 units of capital (bundle A) . The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20.

-Beginning at A, if the producer increases expenditures on labor by $1 and decreases expenditures on capital by $1, then

• A) cost remains constant and output decreases by 8 units.
• B) cost remains constant and output increases by 12 units.
• C) cost remains constant and output increases by 20 units.
• D) output remains constant and cost increases by $8.
• E) output remains constant and cost decreases by $2.

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Definitions:

General Fund

A main operating fund in governmental accounting, covering most basic services and activities.

Direct Increase

An increase in the value or quantity of an asset or account directly due to additional investments or improvements, rather than through earnings.

Capital Assets

Long-term assets acquired for use in business operations, expected to be used or held for more than one financial period.

Capitalized

Costs that are recognized as part of an asset on the balance sheet rather than being expensed, often related to the acquisition or construction of a long-term asset.