Equilibrium market prices for capital and labor are $10 and $8, respectively. Then, the economy experiences one or more supply shocks, so that the marginal product of capital is $12, and the marginal product of labor is $9
Assuming that the available quantities of capital and labor are fixed, which of the following is (are) likely to decrease as the economy approaches its new equilibrium? A) real rental price of capital
B) total output
C) economic profits
D) the quantity of capital in use
E) none of the above
C
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Which of the following indicates that the U.S. economy has become more stable since 1950?
A) less severe fluctuations in real GDP B) longer recessions C) shorter expansions D) All of the above indicate that the U.S. economy has become more stable since 1950.
Refer to Table 4-7. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor demanded?
A) 40,000 B) 570,000 C) 610,000 D) 1,180,000
A member of a cartel like OPEC has an incentive to
A) support equal production quotas for each member. B) argue for larger production quotas for each member of the cartel. C) abide by its individual production quota. D) agree to a low cartel production level and then produce more than its quota.
Suppose you paid $500,000 for an asset. You hold the asset for five years. The interest rate that you get for the asset is 10%. Assume the tax rate on capital gains is 20%.
(A) If capital gains are taxed only when the asset is realized, how much will you have earned on the asset? (B) Suppose that capital gains are taxed annually instead of at realization. How much will you have earned on the asset? (C) How big is the difference in the two taxing schemes?