Explain why a minimum wage creates an inefficient allocation of labor resources
What will be an ideal response?
A competitive labor market allowed to reach its equilibrium creates an efficient allocation of resources. At the equilibrium, the amount of employment is such that the marginal social cost of labor to workers equals the marginal social benefit from labor to firms. A minimum wage set above the equilibrium wage rate creates a surplus of labor—the quantity of labor supplied exceeds the quantity of labor demanded. The minimum wage reduces employment so that it is less than the efficient amount.
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The components of consumption expenditure, investment expenditure, government spending, and spending on net exports (exports minus imports) make up _____________________.
a. aggregate demand b. aggregate supply c. economic demand d. economic supply
If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise
a. True b. False Indicate whether the statement is true or false
Refer to the information provided in Figure 29.1 below to answer the question(s) that follow.
Figure 29.1Refer to Figure 29.1. If policy makers decide at time t2 that the economy is contracting too fast, but the policy changes start affecting the economy at t4, then the policy will be
A. inappropriate. B. optimal. C. well timed. D. ineffective.
A research project is conducted by offering a randomly selected 300 of the 500 local Toyota Prius owners a chance to use a new fuel additive for 6 months to see if their gas mileage improves. 225 of the 300 randomly selected Prius owners agree to the offer, 50 of those drop out of the project after 1 month, another 50 drop out after 2 months, and 25 more drop out after 3 months. The rest remain for the duration of the project. Using the intention to treat method, the results from how many of the Prius owners who were not selected to be a part of the project should be included in the research project?
A. 100 B. 200 C. 325 D. 400