QUESTION 1. Let the fixed cost for production of a good, F, be equal to $2,700; the labour requirement to produce one unit, a, be equal to 2 hours and the wage rate, w, be $25 per hour. Let Q stand for the number of units of output. The unit cost when Q = 1 is ________, and when Q = 3 is________: (a) $2,750 and $900. (b) $2,750 and $1,050. (c) $2,750 and $1400.
QUESTION 1.
Let the fixed cost for production of a good, F, be equal to $2,700; the labour requirement to produce one unit, a,
be equal to 2 hours and the wage rate, w, be $25 per hour. Let Q stand for the number of units of output. The unit
cost when Q = 1 is ________, and when Q = 3 is________:
(a) $2,750 and $900.
(b) $2,750 and $1,050.
(c) $2,750 and $1400.
(d) $2,750 and $950.
Explain why.
QUESTION 2.
A country will choose to protect an industry to promote future
current comparative advantage when:
(a) The interest rate is high.
(b) Time horizon of decision-making is long.
(c) There are fixed cost in technology investments.
(d) The growth rate of expertise is low.
Explain why.
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