The substitution effect of a wage increase:
a. results in an increase in the quantity of labor supplied.
b. results in a decrease in the quantity of labor supplied.
c. has no impact on the quantity of labor supplied
d. results in an increase in the quantity of leisure enjoyed.
a
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Suppose there are different ways of producing computer chips. If you hire one worker (for the day) for each machine that you rent (for the day), you can produce 10 chips per day with each worker/machine pair for the first 60 machine/worker pairs. For the next 60 worker/machine pairs (assuming still that you hire them as pairs for the day), you are able to produce 20 chips per day with each of the additional pairs. Once you have 120 worker/machine pairs, you can only get 5 additional chips per day for each additional pair. But hiring 1 worker for each machine is not the only way to produce computer chips. Suppose you are starting from a production plan where you are using exactly as many workers as machines to produce a given level of chips. The technology is such that, starting at the
production plan where you are using the same number of workers as machines, you can replace 1 or more workers with two machines (for each worker) and get just as many chips produced. Alternatively (and again starting at the production plan where you use exactly as many workers as machines), you can replace 1 or more machines with 2 workers (for each machine) and get just as many chips produced.
a. On the template below, illustrate all the different ways that 600 chips can be produced per day. (Hint: The isoquant you should draw is composed of two line segments.)
b. On the same graph, illustrate the different ways of producing 400 chips and the different ways of producing 1,800 chips. (Label each isoquant with the relevant output quantity).
c. Is this production technology homothetic?
d. If machines cost $100 per day, for what range of daily wages will you decide to use exactly as many workers as machines?
e. Suppose both machines and workers cost $100 per day. Illustrate the long run cost curve for this firm.
f. Illustrate the long-run marginal and average cost curves.
What will be an ideal response?
According to Milton Friedman, how will your consumption be affected by a $2,00 . fine for littering and a $50 cut in your weekly salary that your boss told you to get used to it because it's here to stay? Explain
If the quantity of public goods produced were decided by market forces (supply and demand),
a. there would be more goods provided than would be optimal b. there would be fewer goods provided than would be optimal c. the markets would provide the optimal number of goods d. prices would be optimal, but the optimal quantity of goods would not be produced e. the firms producing the public goods would earn excess profit
The poverty gap is
A. the percentage of people in households with income under the poverty line. B. that level of income sufficient to provide a family with a minimally adequate standard of living. C. the amount of money the poor must earn from work. D. the total amount of money that would have to be transferred to households in poverty to lift them out of poverty.