If there are increasing returns to scale, then it makes sense to consolidate operations into one production facility A) if production above domestic demand can be exported. B) only if the consolidation creates an absolute advantage versus other trading partners. C) if the government subsidizes production. D) Never, because then you lose the possibility of […]
What is “adverse selection”? What will be an ideal response? ANSWER A situation in which the risk associated with the existence of asymmetric information causes one party not to enter into a contractual relationship with another party.
Which of the following statements about the short-run production function is true? A) MP always equals AP at the maximum point of MP. B) MP always equals zero when TP is at its maximum point. C) TP starts to decline at the point of diminishing returns. D) When MP diminishes, AP is at its minimum […]
If the U.S. can produce pizza for $5 each and barrels of beer for $25 each, and Germany can produce pizza for $7 each and barrels of beer for $21 each, then A) each country will produce both pizza and beer. B) the U.S. will produce beer and trade with Germany for pizza. C) the […]
The gap between the value a monopsony places on the last worker hired and the wage paid will increase when A) the supply curve becomes more elastic at the optimum. B) the supply curve becomes less elastic at the optimum. C) the supply curve becomes horizontal. D) the value of the last unit of labor […]
Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bert. According to Coase’s theorem, one necessary condition to alleviate the externality is that A) Al is fined by the government. B) Al has the right to leave trash and Bert cannot do anything about it. […]
A monopsonist purchaser of labor that could negotiate a different wage for each worker could A) purchase less labor than a regular monopsonist. B) purchase more labor than a regular monopsonist. C) rotate the marginal expenditure curve to the left. D) shift the marginal expenditure curve to the left. ANSWER B
The marginal product of the fourth worker is A) 150 units of output. B) 24 units of output. C) negative. D) 36 units of output. ANSWER B
An automobile company has two factories, one in Vietnam and one in Australia each with the same number of workers. The Vietnamese factory can produce either 150 engines or 100 transmissions per day. The Australian factory can produce either 100 engines or 75 transmission per day. A) The Vietnamese factory has an absolute advantage producing […]
The difference between the marginal expenditure and the wage is greater when the supply curve of labor is A) less elastic at the monopsony optimum. B) more elastic at the monopsony optimum. C) more elastic than the demand curve. D) The difference does not depend on any elasticity. ANSWER B
