Under perfect competition, the average revenue curve of the firm coincides with its average cost curve
a. True
b. False
Indicate whether the statement is true or false
False
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Structural unemployment
A) falls during the expansion phase of the business cycle. B) falls as the pace of technological progress increases. C) generally lasts longer than frictional unemployment. D) falls when the government provides more generous unemployment compensation benefits.
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.
One basic difference between "land" and "capital" resources is that land is
A. a gift of nature, while capital is manufactured. B. manufactured, while capital is a gift of nature. C. unlimited, while capital is limited. D. limited, while capital is unlimited.
Consider a consumer with preferences for consumption of a composite good (C) and leisure (L) given by the following utility function:
U(C,L) = 2C1/2 + L Denote the consumer's wage rate by w and total time available for labor and leisure is normalized to one. The price of consumption is one. Denote the amount of labor supplied as N, so that N + L = 1. The consumer also earns non-labor income ("allowance") of 0. a. Write out the budget constraint determining feasible allocations of leisure and consumption. b. Compute the optimal bundle of leisure and optimal bundle of consumption. c. Derive the consumer's labor supply function: N*(w, ). d. Determine the effect of increasing non-labor income on the supply of labor (that is, compute the relevant partial derivative). e. How does non-labor income affect the consumption of the composite good, C? f. Compute the effects of an increase in wage on consumption and labor supply. Is leisure a normal good?