Comment on the following statement: "Input and output markets should be considered separately because they operate independently of one another."
What will be an ideal response?
The statement is false. Input and output markets are connected because firms and households make simultaneous decisions in both arenas. For example, a change in the price of one input will affect the amount of the input used, the demand for other inputs and the cost of producing the output. This will affect the quantity of the output purchased by households and may affect household demands for other goods as well.
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"When there is a shortage of loanable funds, the real interest rate will increase." Explain whether the previous statement is correct or not
What will be an ideal response?
The market supply curve
a. is found by vertically adding the individual supply curves. b. slopes downward. c. represents the sum of the prices that all the sellers are willing to accept for a given quantity of the good. d. represents the sum of the quantities supplied by all the sellers at each price of the good.
Information costs
A) are the costs of buying and selling financial claims. B) include the costs that savers incur to determine the credit worthiness of borrowers. C) include the costs borrowers incur to discover the best investments to make with the money they have borrowed. D) are zero in financial markets, but high for transactions carried out through financial intermediaries.
Unions do not need to worry about the effects of greater employment numbers on the wage rate.
Answer the following statement true (T) or false (F)