Question

In: Economics

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units...

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labour to produce its total output of 640 units. Each unit of capital costs $10, each unit of raw materials, $4, and each unit of labour, $3.

92) Refer to the above information. The per unit cost of production in this economy is: A) $1.00. B) $.10. C) $.05. D) $.50. Answer: B

93) Refer to the above information. If the per unit price of raw materials rises from $4 to $8 and all else remains constant, the per unit cost of production will rise by about: A) 50 percent. B) 30 percent. C) 40 percent. D) 100 percent. Answer: B

94) Refer to the above information. As a result of the change indicated in the previous question, the aggregate: A) supply curve would shift to the right. B) demand curve would shift to the right. C) demand curve would shift to the left. D) supply curve would shift to the left.

Expert Solution

Answer : 92) The answer is option B.

Based on given information,

Total cost for capital = 2 units * $10 = $20

Total cost for raw materials = 5 units * $4 = $20

Total cost for labor = 8 units * $3 = $24

Total Cost for 640 units of production = Total capital cost + Total raw materials cost + Total labor cost = 20 + 20 + 24 = $64.

So, 1 unit of production cost = 64 / 640 = $0.10

Therefore, the answer is option B.

93) The answer is option B.

After changes in price of raw materials,

Total cost of raw materials = 5 units * $8 = $40

Total Cost for 640 units of production = Total capital cost + Total raw materials cost + Total labor cost = 20 + 40 + 24 = $84

So, 1 unit of production cost = 84 / 640 = $0.13

% change in per unit production cost = (change in per unit production cost / Old per unit production cost) * 100

=> % change in per unit production cost = [(0.13 - 0.10) / 0.10] * 100

=> % change in per unit production cost = 0.3 * 100 = 30%

Therefore, option B is correct.

94) The answer is option D.

As the per unit production cost increases after increasing the price of raw materials, the economy's production level will decrease. As a result, the supply curve will shift to leftward. Therefore, option D is correct.

Rahul Sunny answered 1 year ago

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