Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers?
What will be an ideal response?
Answer: The equilibrium wage rate and the equilibrium quantity of labor will both decrease.
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Assume a firm is able to use an optimal two-part tariff
a. Is the outcome economically efficient? Why or why not? b. What happens to consumer surplus? c. Does this represent perfect price discrimination? Why or why not? What will be an ideal response?
The marginal revenue product of capital is
A) the change in the firm's revenue as a result of employing one more unit of capital, such as a machine. B) the economic rent received by hiring an additional unit of capital. C) the cost to the firm of renting an additional unit of capital. D) the revenue generated by substituting capital for labor in the production process.
Fracking involves:
A) extracting certain forms of energy from shale rock formations B) deep water drilling for energy with minimal externalities C) the reduction of menu costs thus allowing prices to adjust more freely D) breaking down the production of goods resulting in more competitive markets
If the Fed decides to buy T-bills, it increases the demand for T-bills. How will this affect the price of T-bills and the interest rate?
a. T-bill prices fall and interest rates fall. b. T-bill prices rise and interest rates rise. c. T-bill prices rise and interest rates fall. d. T-bill prices fall and interest rates rise.