Assignment Task: Suppose that a hypothetical economy has the following relationship between its real domestic output and the input quantities necessary for producing that level of output.
| Input quantity |
Real domestic output |
| 400 |
800 |
| 300 |
600 |
| 100 |
200 |
(a) What is the level of productivity in this economy?
(b) What is the unit cost of production if the price of each input is $2.00?
(c) If the input price decreases from $2 to $1.50, what is the new per unit cost of production? What impact would this have on the short-run aggregate supply curve?
(d) Suppose that instead of the input price decreasing, the productivity had increased by 25%. What will be the new unit cost of production? What impact would this change have on the short-run aggregate supply curve?