Suppose the U.S. dollar is backed by one-sixth of an ounce of ...

[Hungry!]

Suppose the U.S. dollar is backed by one-sixth of an ounce of gold and the British pound is backed by one-third of an ounce of gold. The exchange rate between the U.S. dollar and the British pound equals ________ per pound.
 
  A) 0.50 B) 1.00 C) 1.50 D) 2.00

Question 2

Salmon fishing in Alaska is a seasonal business; May through September is the best time to bait salmon and halibut. Toland Fisheries, a small commercial fishery, recorded its highest ever catch last year.
 
  They started this year's fishing season with the same number of workers and equipment. With the new season also starting well, Toland has increased hiring substantially. However, the fishery did not make any additional investment in trawlers and other fishing equipment. Other things remaining unchanged, what is likely to happen to the marginal product of each new worker in the short run? a. Other things remaining unchanged, what is likely to happen to the marginal product of each new worker in the short run? b. Is the outcome likely to be different in the long run? Explain your answer.

[aruss1303]

Answer to Question 1

D

Answer to Question 2

a. The law of diminishing returns says that successive increases in inputs eventually leads to less additional output. It implies that since the number of trawlers is fixed in the short run, the marginal product of workers will eventually decrease.
b. In the long run, Toland Fisheries will have to increase its capital (trawlers and other equipment used for fishing) in order to increase worker productivity.

[Hungry!]

Excellent

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TYSM