Use the Following to Answer Questions

question 51

Multiple Choice

Use the following to answer questions:
Scenario: Capital
An economy initially has 200 units of physical capital per worker. Each year it increases the amount of physical capital by 10%. According to the aggregate production function for this economy, each 1% increase in physical capital per worker, holding human capital and technology constant, increases output per worker by 0.25%.
-(Scenario: Capital) Look at the scenario Capital. If there is no inflation and output per worker is initially $1,000, what does the estimated output per worker equal after one year?

• A)$1,250
• B)$2,500
• C)$1,225
• D)$1,025

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms, free entry and exit, and a product that is considered perfectly homogeneous, leading to firms being price takers.

Average Total Cost

The total cost of production divided by the quantity produced, representing the per unit cost of production.

Industry Supply

The total amount of a product or service that is available for purchase within an industry.

Perfectly Competitive

A market structure where many firms sell identical products, there are no barriers to entry or exit, and no single buyer or seller can influence the market price.