If a Pair of Sunglasses Costs $80 in the U

question 33

Multiple Choice

If a pair of sunglasses costs $80 in the U.S.and 80 pounds in the U.K.and the exchange rate is 1.70 pound per dollar,then the pound is

• A) Correctly valued according to PPP.
• B) Undervalued relative to PPP.
• C) Overvalued relative to PPP.
• D) None of the above.

Distinguish between marginal product, average product, and their impact on production and hiring decisions.

Understand the concept of diminishing returns to labor and its effect on production.

Recognize the role of factor incomes in the economy and their distribution among different factors of production.

Understand the relationship between the price of a good and the demand for the factor that produces it.

---

Definitions:

Marginal Cost

The increase in total production costs resulting from the production of one additional unit of a product or service.

Average Total Cost

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

Profit

The financial gain achieved when the revenue from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Marginal Cost

The escalation in cumulative price involved in fabricating one extra unit of a product or service.