Suppose that a hypothetical economy has the following relationship between its real domestic output and the input quantities necessary for producing that level of output.
(a)What is the level of productivity in this economy?
(b)What is the unit cost of production if the price of each input is $2.00?
(c)If the input price decreases from $2 to $1.50,what is the new per unit cost of production? What impact would this have on the short-run aggregate supply curve?
(d)Suppose that instead of the input price decreasing,the productivity had increased by 25%.What will be the new unit cost of production? What impact would this change have on the short-run aggregate supply curve?
Definitions:
Acidic
Pertaining to substances that have a pH less than 7, and are capable of donating a proton or hydrogen ion in a chemical reaction.
Strong Acids
Acids that completely ionize in solution, yielding a high concentration of hydrogen ions (H+) and demonstrating a strong ability to donate protons.
Strong Acid
An acid that completely dissociates in water, releasing a high concentration of hydrogen ions and exhibiting a low pH.
Formic Acid
A colorless, pungent liquid with the formula HCOOH, used in various chemical manufacturing processes and as a preservative.
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