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:
Grocery Store
A grocery store is a retail establishment that specializes in selling food and other household goods.
Accounts Receivable Turnover
A financial ratio that measures how many times a company collects its average accounts receivable in a period.
Sales
The total amount of goods or services sold by a company, serving as a primary source of revenue.
Net Income
A company's overall earnings following the deduction of all expenses and taxes from its gross income.
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