Suppose Country A, a labor-abundant country, produces only wheat and cloth. The following equations illustrate the prices and costs of wheat and cloth in the country. The numbers indicate the amounts of labor and land needed to produce a unit of wheat and cloth. 'W' is the wage rate and 'r' is the rental rate of land.Price of wheat = 1w + 2rPrice of cloth = 2w + 1rIf the initial prices of wheat and cloth are $3 per unit, the labor cost per unit of cloth output is ________ and the rental cost per unit of cloth output is
A. $1; $2.
B. $3; $1.
C. $2; $1.
D. $1; $3.
Answer: C
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What does the "invisible hand" refers to?
You are a manager for a monopolistically competitive firm. From experience, the profit-maximizing level of output of your firm is 100 units. However, it is expected that prices of other close substitutes will fall in the near future. How should you adjust your level of production in response to this change?
A. Produce less than 100 units. B. Produce more than 100 units. C. Produce 100 units. D. Insufficient information to decide.
Basic supply and demand analysis indicates that having firms rather than the government provide health insurance to workers
A) changes both the composition of the compensation that firms pay and its level. B) changes the composition of the compensation that firms pay, but does not change its level. C) does not change the composition of the compensation that firms pay, but does change its level. D) changes neither the composition of the compensation that firms pay nor its level.
Refer to the scenario above. If Rebecca wins the auction, she will earn a surplus of ________
A) $1,000 B) $4,500 C) $5,000 D) $45,000