According to Milton Friedman,income Declines Relative to Permanent Income During

question 84

Multiple Choice

According to Milton Friedman,income declines relative to permanent income during a business cycle contraction,causing the demand for money relative to actual income to increase,thereby causing velocity to

• A)rise.
• B)decline.
• C)remain unchanged,since velocity depends only on interest rates.
• D)decline,provided that interest rates increase when the economy contracts.

Understand how to interpret isocost lines in relation to the firm's costs of capital and labor.

Grasp the concept of optimal combination of capital and labor for a firm.

Learn how to derive a total cost curve from isoquants and isocost lines.

Comprehend the calculation and implications of the slope of isocost lines.

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Definitions:

Long-Run Minimum Cost

The lowest cost at which a firm can produce any given level of output in the long run, when all inputs can be varied.

Average Total Cost Curve

A graph that shows the cost per unit of output at different levels of production, illustrating how average total cost changes with changes in output.

Short-Run

A period in which at least one of a firm's inputs is fixed and cannot be changed.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced, which decreases as production increases.