European Union labor costs exceed U.S. and British labor costs primarily because
a. worker productivity is lower in the EU
b. union wages are higher in the EU
c. layoffs and plant closings are more restrictive in the U.S. and Britain
d. the amount of paid time off is higher in the EU
e. labor-management relations are better in the EU
QUESTION 2An international producer is trying to centralize its R&D. This is consistent with it trying to
a. Set up a functional division
b. Take advantage of the economies of scale
c. Take advantage of the learning curve effect
d. All of the above
QUESTION 3Based on the above scenario, is the industry in the long run equilibrium?
a. yes, because all firms are producing at P=MR=MC
b. no, because the price is still greater than the minimum average total cost.
c. cannot answer because need information on MR
d. cannot answer unless we see that the market lets some firms enter and/or some firms exit.
QUESTION 4Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because
a. out-of-pocket costs of production decline
b. free trade areas protect infant industries
c. economies of scale are present
d. manufacturers face diminishing returns
e. more goods are available for consumption
QUESTION 5Which of the following is FALSE about firms organized along functional lines?
a. Workers develop functional expertise
b. Workers can easily share information within their division
c. They inhibit the exploitation of economies of scale
d. None of the above
QUESTION 6Each firm in the egg industry (competitive) produces 15 million eggs per year. Each egg has an average cost of 0.02 and they sell an egg for 0.06 . The marginal cost of a string is
a. 0.02
b. 0.06
c. 0.04
d. not enough information provided.
QUESTION 7The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time
a. increase exports
b. reduce the competitive pressure on prices
c. lower the value of the currency in the country with the higher inflation rate
d. increase foreign aid
e. increase the speculative demand for the currency
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