econ-3133 functions and variables

best represents constant return to scale

3Y=AF(3k,3L)

what is the aggregate production function

Y=AF(K,L)

An increase in foreign investment in​ Brazil's mining industry will increase the capital stock in Brazil. All else​ equal, as the capital stock​ increases, the marginal product of capital ​(​MPK) will

decrease due to diminishing marginal returns

The marginal product of capital is the​ ________ curve for capital and the marginal product of labor is the​ ________ curve for labor.

demand; supply

All else​ equal, if the demand for labor increases and the supply of labor does not​ change, the equilibrium real wage will​ ________ and the equilibrium quantity of labor will​ ________.

increase; not change

All else​ equal, an increase in labor hours will cause a

movement up and to the right along PF1

The standard of living ultimately depends on labor productivity because

no limit to how much labor produtivity increases / limits exist on input of labor

The marginal product of capital is always​ ________ and it​ ________ as the capital stock increases.

positive - decreases

The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the​ firm's

production function

If the nominal rental price of capital divided by the price of output is less than the marginal product of​ capital, a firm that wishes to maximize profits will

purchase more capital goods

A firm that wishes to maximize profits will continue to hire labor until the

real wage = MPL

all else equal, increase in capital stock will cause a

shift from PF1 to PF2

All else​ equal, continued increases in the labor supply in an economy will lead to

smaller increases in real GDP

The two factors determining labor productivity are

the capital-labor ratio and total factor productivity.

The aggregate production function is an equation that shows the relationship between​ ________ and​ ________.

the inputs employed by​ firms; the maximum output firms can produce with those inputs

Firms decide the amount of labor and capital to use in production by employing inputs to the point where

the real wage equals the marginal product of labor and the real rental price of capital equals the marginal product of capital.

Diminishing marginal returns do not exist for increases in

total factor productivity

With the​ Cobb-Douglas production​ function, Y=AK1/4L3/4​, if both capital and labor increase by 90​%,what will happen to real​ GDP?

will increase by exactly 90%