Assume a Firm Purchases Resources a and B Under Purely

question 63

Multiple Choice

Assume a firm purchases resources a and b under purely competitive conditions and combines these resources to produce X. Product X is sold in a purely competitive market. The MPs of a and b are 6 and 3, respectively, and the prices of a and b are $12 and $6, respectively. If equilibrium exists, the price of X will be

• A) $1.
• B) $0.50.
• C) $2.
• D) $5.

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Definitions:

Output

The total amount of goods or services produced by a firm, industry, or economy within a specified time period, reflecting the level of production activity.

Unemployment

The situation in which individuals who are capable of working and willing to work cannot find employment.

Short-run Phillips Curve

A graphical representation showing an inverse relationship between the rate of inflation and the unemployment rate in the short-term.

Long-run Phillips Curve

The long-run Phillips Curve illustrates the theory that over time, the relationship between inflation and unemployment stabilizes, suggesting no long-term trade-off between the two.