1. You are the manager of two manufacturing plants. Both plants produce exactly the same product and both plants use only labor to produce the product. Plant A is more productive than Plant B. Your goal is to get the most output from a fixed amount of labor. How will you allocate labor across the two plants? Will you allocate all labor to the more productive Plant A? Will you use some other way to decide to allocate labor? Explain.
2. Suppose that prices of some goods increase while prices of other goods remain constant. The cost of living will rise for some consumers and fall for others. Explain whether this statement is true or false.