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ECO CHAPTER 3

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Which market determines the real wage and employment? Correct Answer: the labor market In the equation that describes the production function, an increase in total factor productivity is represented by Your Answer: an increase in  A. Suppose the economy's production function is: Y  =  A   K 0.3 N 0.7 If  K  = 1000 and  N  = 50, then  Y  = 2000. What is  Y  if  K  = 2000 and  N  = 100? Correct Answer: 4000 The marginal product of capital Your Answer: displays diminishing marginal productivity only when the capital stock is small. Correct Answer: is measured by the slope of the line tangent to the production function relating output and  capital. The Grungo Company has the following production function: Number of Workers Number of Grungos Produced 0 0 1 10 2 19 3 26 4 31 5 34 If the real wage rate is 6, how many workers will the company hire?

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