Sue consumes only sandwiches and soda and is at her best affordable point. The price of a sandwich falls. The substitution effect is that Sue substitutes ________ for ________. The income effect is that Sue ________.
A) sandwiches; soda; buys less of both goods
B) soda; sandwiches; buys more soda and fewer sandwiches
C) sandwiches; soda; buys more of both goods
D) soda; sandwiches; buys less soda and more sandwiches
Ques. 2Goods or services that can be produced only by using unique or rare productive resources tend to have a low elasticity of supply.
Indicate whether the statement is true or false
Ques. 3The union representing the bread makers at the Hostess Bread Company went on strike and demanded higher wages than what the firm wanted to pay.
I. If the firm is in a competitive labor market the union can only raise wages by decreasing employment.
II. If the firm is a monopsony in the labor market the union can only raise wages by decreasing employment.
III. If the firm is a monopsony in the labor market the union can both raise wages and increase employment.
A) I only
B) II only
C) I and II
D) I and III
Ques. 4All along the beach in San Diego, California are shops which rent boogie boards for 3 per hour. Tourists perceive that all rental boogie boards are identical and there are no restrictions on entry and exit in the boogie board market.
Suppose Surf's Up is a boogie board rental shop. To maximize profits, Surf's Up would produce a quantity where A) Marginal revenue is greater than marginal cost.
B) Marginal revenue is equal to marginal cost.
C) Marginal revenue is less than marginal cost.
D) Price is maximized.
Ques. 5A worker pays a tax for Social Security at a constant rate up until a certain level of income is reached. Beyond that income level, no more Social Security tax is paid. The Social Security tax is an example of a
A) progressive tax.
B) regressive tax.
C) proportional tax.
D) sales tax.
Ques. 6If the monopoly illustrated in the figure above could engage in perfect price discrimination, then each buyer would pay
A) 2.00.
B) 3.00.
C) 3.50.
D) a different price.
Ques. 7FasterChip, Inc is considering five alternative techniques for assembling personal computers. The table shows the amounts of labor and capital required by each of these techniques to make 10 computers a day.
Labor costs 15 an hour and capital costs 100 a unit. a) Which techniques are technologically efficient and which are not? Explain your answer. b) Which technique is economically efficient? Explain. c) If FasterChip uses its plant in Mexico, it can lower the labor cost to 10 an hour. Which technique will the company use in Mexico? Explain.
Ques. 8In a monopsony labor market, a minimum wage set equal to the competitive market equilibrium wage rate can ________ the wage rate and ________ employment.
A) raise; increase
B) raise; decrease
C) lower; increase
D) lower; decrease
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