Author Question: Suppose our firm produces chartered business flights with capital (planes) and labor (pilots) in ... (Read 129 times)

rl · **on:** Jul 1, 2018

Suppose our firm produces chartered business flights with capital (planes) and labor (pilots) in fixed proportion (i.e., one pilot for each plane).

If the wage rate paid to the pilots increases relative to the rental rate of capital for the airplanes, then: A) the optimal capital-labor ratio should increase.
B) the optimal capital-labor ratio should decrease.
C) the optimal capital-labor ratio remains the same.
D) We do not have enough information to answer this question.

Question 2

Which of the following statements about the composition of price indices is NOT true?

A) The Paasche index is calculated with current-year prices.
B) The Paasche index is calculated with base-year quantities for the bundle.
C) The Laspeyres index is calculated with current-year prices.
D) The Laspeyres index is calculated with base-year quantities for the bundle.