Suppose the natural rate of unemployment is 4 percent. What is the actual rate of unemployment if actual output is 2 percent below potential output?
A. 8 percent
B. 5 percent
C. 6 percent
D. 3 percent
Answer: B
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Inefficient use of resources leads to:
a. production bundles inside the production set. b. production bundles outside the production set. c. a reduction in the production set. d. production of a combination on the production set.
John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance he will earn $100,000 and a 50 percent chance he will earn $300,000. If he does expand, there is a 30 percent chance he will earn $100,000, a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000. It will cost him $150,000 to expand. If John were to expand, which of the following is true?
A. John can expect to earn $120,000 more by expanding, but that is less than the cost of expansion, $150,000. B. John's expected earnings are $50,000 less than if he didn't expand. C. John can expect to earn $120,000 more by expanding and therefore made the most profitable decision. D. All of these statements are true.
The efficiency wage model is an explanation of wage __________ and thus a support for the ____________________ view
A) flexibility; Keynesian B) flexibility; classical C) inflexibility; Keynesian D) inflexibility; classical
Ernie's Sushi-On-A-Stick is a perfectly competitive firm currently employing 75 workers. The marginal revenue product of the 75th worker is $9.00 per hour. The wage rate is $12.00 per hour. To increase profits, this firm should
A. continue hiring 75 workers because the firm earns a surplus of $3.00 on each worker hired. B. increase the price of sushi-on-a-stick so that the marginal revenue product increases to $12.00 per hour. C. decrease employment until the MRP of labor equals $12.00. D. increase employment until the MRP of labor equals $12.00.