At a Given Level of Wheat Output, One More Unit

question 47

Multiple Choice

At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more unit of seed would produce 30 extra bushels.A unit of labor costs $6, and a unit of seed costs $12.The farmer should

• A)produce less wheat.
• B)buy only seed.
• C)buy more seed and less labor.
• D)buy less seed and more labor.

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Definitions:

Crude Quantity Theory

A theoretical framework suggesting that changes in money supply have a direct, proportional effect on the price level in an economy.

V and Q

Symbols often used in equations and formulas, V typically represents volume and Q can represent quantity.

Discretionary Policies

Economic policies based on ad hoc decisions by government or policymakers rather than set by rules.

Rational Expectations

The economic theory that individuals make decisions based on their expectations of future economic conditions, which are formed by using all available information.