In a two-person exchange, if the price offered to the seller is less than the opportunity cost of production, the exchange will not take place.
Indicate whether the statement is true or false
QUESTION 2If labor is the only variable input, an increase in the quantity of labor:
a. does not have any effect on the quantity of output.
b. causes the output to increase initially at a diminishing rate and then at an increasing rate.
c. causes the output to increase at a constant rate till the last worker is hired.
d. causes the output to increase initially at an increasing rate and then at a decreasing rate.
e. causes the output to decrease at a constant rate till the last worker is hired.
QUESTION 3A perfectly competitive firm faces a perfectly elastic demand curve.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4Which of the following actions can be categorized as rent seeking?
a. Increase in the income tax rates by the government
b. Lobbying efforts of individuals or groups to gain favors from the government
c. Profit maximizing firms charging a price greater than their marginal costs
d. Export of goods from developing to developed countries
e. Government intervention in the real estate market
QUESTION 5Identify and define the different types of constraints individuals face while making different choices.
QUESTION 6After hiring a new employee, a manager finds that the total output has increased. When the manager hires another employee however, he realizes that although the total production has increased, the increment is less than the previous case. This is the result of:
a. diseconomies of scale.
b. a general economic downturn.
c. diminishing marginal returns.
d. the lack of skills of the two new employees.
e. constant returns to scale.
QUESTION 7The demand curve faced by a perfectly competitive firm is vertical.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 8Unproductive actions designed to increase income or wealth are known as:
a. transfer payments.
b. incorporation.
c. profit seeking.
d. income search.
e. rent seeking.
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