Consider a Firm That Seeks to Minimize the Cost of Producing

question 12

Multiple Choice

Consider a firm that seeks to minimize the cost of producing a given level of output. How will it respond to an increase in the wage rate?

• A) It will hire more workers
• B) It will increase production
• C) It will substitute capital for labour
• D) It will decide based on whether labour is an inferior factor of production or a normal one
• E) It will not react at all

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Definitions:

Campaign Pledge

A promise or commitment made by a political candidate or party to the electorate as part of their platform during an election campaign.

Balanced Budget Amendment

A proposed federal constitutional rule requiring that the government not spend more than its income in a fiscal year, aimed at ensuring fiscal responsibility.

Equilibrium GDP

Equilibrium GDP, or Gross Domestic Product, is the level of output where aggregate demand equals aggregate supply, resulting in no unintended changes in inventories.

Inflationary Gap

This term reflects the difference between the actual output of an economy and the maximum potential output it could achieve with full employment, often indicating inflation pressures.