The underground economy — the informal sector — can be a significant drag on the economies of developing countries. Why are firms in the informal sector often less efficient than firms in the formal sector?
What will be an ideal response?
Entrepreneurs of the firms in the informal sector limit their investments in capital equipment because they are afraid that the firms will someday be shut down. The workers in the firms, consequently, have less capital equipment to work with.
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A profit maximizing firm in any type of market for its output would hire the quantity of labor at which
a. the marginal cost of output is equal to the marginal revenue product of labor, where MRP is sloping downward. b. the wage rate is equal to marginal revenue product, where MRP is downward sloping. c. the wage rate is equal to marginal revenue product, where MRP is still sloping upward. d. the difference between the wage rate and marginal revenue product is greatest.
When should a firm increase its production?
a. When it is earning a positive profit. b. When its revenues are too low to cover the firm's fixed costs. c. When there is a fall in the price of its product. d. When its marginal revenue exceeds its marginal cost.
A demographic trend is that:
a. Individuals increasingly put off marriage and childbirth to later years b. The number of families is decreasing c. Families are the same as they were two decades ago d. Grandparents matter less than they used to
A household is hurt on the ________ side when its net profits or wages fall, and it is hurt on the ________ side when the prices of goods and services increase.
A. input; output B. flow; stock C. sources; uses D. uses; sources