Suppose Two Goods (X and Y )Are Being Produced Efficiently

question 26

Multiple Choice

Suppose two goods (X and Y ) are being produced efficiently and that the production of X is always more labor intensive than the production of Y.Production depends only on two factors (capital and labor) ; these may be smoothly substituted for each other.The total quantities of these inputs are fixed.An increase in the production of X and a decrease in the production of Y will

• A)increase the capital-labor ratio in each firm.
• B)decrease the capital-labor ratio in each firm.
• C)leave the capital-labor ratio for each firm unchanged.
• D)increase the capital-labor ratio in Y production and decrease the capital-labor ratio in X production.

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Definitions:

Maturity

The date on which a financial obligation, note, bond, or loan must be repaid in full or the final payment is due.

Bond Indenture

The contract between a bond issuer and the bondholders, outlining terms such as interest rates, repayment schedules, and other conditions.

Bondholders

Individuals or entities that hold the debt securities issued by corporations or governments.

Issuing Company

The entity that offers its own securities like stocks or bonds for sale to investors to raise capital.