Assume that CDs are a normal good and that the price of stereo equipment falls while the labor costs of producing CDs increase. What will happen in the market for CDs?
What will be an ideal response?
Since stereo equipment is a complementary good to CDs, a decrease in the price of stereo equipment causes the demand for CDs to increase. The increase in labor costs causes the supply of CDs to decrease. The price of CDs will increase, but the quantity sold in the market could increase, decrease, or remain the same. The quantity effect depends on how much demand increased relative to how much supply decreased.
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An increase in the supply of labor
a. increases the equilibrium wage and increases the value of the marginal product of labor. b. increases the equilibrium wage and decreases the value of the marginal product of labor. c. decreases the equilibrium wage and increases the value of the marginal product of labor. d. decreases the equilibrium wage and decreases the value of the marginal product of labor.
System in which an agency such as a government determines everyone's share.
a. price floor b. price ceiling c. deficiency payment d. rationing
A monopsonist's marginal factor cost (MFC) curve lies above its supply curve because the firm must:
A. lower the factor price to hire more. B. increase the price of its product to sell more. C. increase the factor price to hire more. D. lower the product price to sell more.
Which of the following is NOT provided in the textbook as something that might lead to the creation of a new market?
A. New laws B. New buyers C. New sellers D. New services