In a Small Country Each Labor Hour Has Capital Stock

question 7

Multiple Choice

In a small country each labor hour has capital stock equal to 900 units. This year it produced 20 units of new capital goods, with a depreciation rate of 20 percent, and a production function of . What will its level of capital stock per labor hour be next year?

• A) 920 units
• B) 720 units
• C) 900 units
• D) 740 units

Analyze cost minimization and the determination of the optimal level of production.

Comprehend the difference between short-run and long-run costs in production.

Calculate total, variable, and fixed costs based on given data.

Understand the relationship between marginal cost and average total cost and how it influences production decisions.

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Definitions:

Natural Monopoly

A market in which a single firm can provide a good or service at a lower cost than any potential competitor, due to economies of scale.

Lower Cost

A situation where the expenses involved in producing a good or service are reduced, leading to potential savings.

Social Regulation

Rules imposed by government aimed at improving societal welfare, focusing on areas such as health, safety, and the environment, rather than on economic matters.

Natural Monopoly

A market structure where a single firm can produce at a lower cost than can two or more firms, justifying limited competition.