Answer the following statement(s) true (T) or false (F)
1. To know if the addition of a worker will add to a firm’s profits you must know both the
marginal revenue product and the marginal resource cost.
2. Marginal revenue product is calculated by multiplying the marginal product times the
marginal resource cost.
3. The equilibrium wage (W*) is the median cost of labor, with half of the workers
making more and half making less.
4. The substitution effect describes the tendency of workers at a low wage rate to have
a high rate of absenteeism.
5. If the substitution effect is stronger than the income effect, the individual’s labor
supply curve is backward bending.
1. TRUE
2. FALSE
3. FALSE
4. FALSE
5. FALSE
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To obtain real average hourly earnings, nominal average hourly earnings are multiplied by the CPI
Indicate whether the statement is true or false
The fact that our wants are unlimited but our resources are limited implies that
A) we should limit our wants. B) entrepreneurship has failed as an economic system. C) we have to make choices. D) the only way to make someone better off is to make someone else worse off.
The old saying, “There are no free lunches,” can best be used to explain that ______.
a. free-riders will use goods without paying for them b. there are trade-offs for every government program c. transaction costs prevent the completion of most deals d. private firms are more efficient than the government
It takes a considerable amount of time to increase the production of pork. This implies that:
A. a change in the demand for pork will not affect its price in the short run. B. the short-run supply curve for pork is less elastic than the long-run supply curve for pork. C. an increase in the demand for pork will elicit a larger supply response in the short run than in the long run. D. the long-run supply curve for pork is less elastic than the short-run supply curve for pork.