If dairy farmers use automatic milking machines instead of milking by hand, which economic question does their decision answer?
a. What to produce?
b. How to produce?
c. For whom to produce?
d. Who has a comparative advantage in milking?
e. What is the price of milk?
B
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When the price of a product decreases, the purchasing power of our income increases and thus permits consumers to purchase more of the product. This statement describes
A. the income effect. B. an inferior good. C. the rationing function of prices. D. the substitution effect.
The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory. In July 2015, The Economist reported that the average price of a Big Mac in the United States was $4.79
In Switzerland, the average price of a Big Mac at that time was 6.50 Swiss francs. If the exchange rate between the dollar and the Swiss franc was 0.93 Swiss francs per dollar, explain how it would be profitable to buy Big Macs in the United States instead of in Switzerland.
The existence of internal economies of scale
A) cannot be associated with a perfectly competitive industry. B) may be associated with a perfectly competitive industry. C) is associated only with sophisticated products such as aircraft. D) cannot form the basis for international trade. E) focuses more on the industry than individual firms.
If the United Mine Workers successfully negotiates a wage that is higher than the competitive wage,
a. an excess demand for labor is created b. a surplus of labor is created c. the demand for labor increases d. the supply of labor decreases e. the quantity of labor demanded increases