Income effect of lowering wages implies
A. workers prefer leisure to work.
B. an increase in the productivity of labor.
C. a fall in the demand for labor.
D. workers would want to work more.
Answer: D
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When the automobile replaced horse-drawn carriages as the principal means of transportation, firms producing horse-drawn carriages went bankrupt and permanently laid off all their workers, thereby increasing
i. seasonal unemployment. ii. structural unemployment. iii. cyclical unemployment. A) i and iii B) ii and iii C) ii only D) i and ii E) i only
If the economy is on its short-run Phillips curve at the natural unemployment rate, then in the AS-AD model, real GDP is definitely
A) decreasing. B) greater than potential GDP. C) less than potential GDP. D) increasing. E) equal to potential GDP.
Bonnie can produce either 10 hats or 20 scarves in a month. Phil can produce either 10 hats or 5 scarves in a month. Therefore:
A) Phil has a comparative advantage in hats, Bonnie in scarves. B) Bonnie has a comparative advantage in hats, Phil in scarves. C) Phil has a comparative advantage in both hats and scarves. D) Bonnie has a comparative advantage in both hats and scarves. E) Neither of them has a comparative advantage in hats.
The difference between absolute and comparative advantage is that:
a. absolute advantage refers to input cost, while comparative advantage refers to opportunity cost. b. absolute advantage refers to opportunity cost, while comparative advantage refers to input cost. c. absolute advantage refers to individuals, and comparative advantage refers to countries. d. absolute advantage refers to countries, and comparative advantage refers to individuals. e. absolute advantage is applicable to intranational trade, while comparative advantage applies to international trade.