Any two of these events in questions 1 and 2 occur together? (Draw the diagrams!)
What will be an ideal response?
There are six combinations:
(1) If the price of a PC falls and the price of an MP3 download rises, demand decreases, supply is unchanged, so the price falls and the quantity decreases.
(2) If the price of a PC falls and more firms produce MP3 players, demand decreases and supply increases so the price falls and the quantity might increase, decrease, or not change.
(3) If the price of PC falls and the wages paid electronic workers rise, demand decreases and supply decreases so the quantity decreases and the price might rise, fall, or not change.
(4) If the price of an MP3 download rises and more firms produce MP3 players, demand decreases and supply increases so the price falls and quantity might increase or decrease or remain the same.
(5) If the price of an MP3 download falls and the wages paid electronic workers rise, demand decreases and supply decreases so the quantity decreases and the price might rise or fall or remain the same.
(6) If more firms produce MP3 players and the wages paid electronics workers rise, supply might increase or decrease or remain unchanged, demand is unchanged, so the outcome cannot be predicted.
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A firm should hire more workers to increase its profits if
A) the marginal product of labor is greater than the wage the firm will pay these workers. B) there is enough capital and other resources for the workers to use. C) the demand for labor is elastic. D) the wage rate is less than the marginal revenue product of labor.
If labor-intensive textile products could be produced more cheaply in low-wage countries than in the United States, the United States would gain if it
a. levied a tariff on the goods produced by the cheap foreign labor. b. subsidized the domestic textile industry so it could compete in international markets. c. used its resources to produce other items while importing textiles from foreigners. d. levied a tax on the domestic textile products to penalize the industry for inefficiency.
In order to minimize losses in the short run, a perfectly competitive firm should shut down if
A. total revenue is less than total cost. B. total revenue is less than the difference between total fixed cost and total variable cost. C. total revenue is less than total variable cost. D. total revenue is less than total fixed cost.
How did the actions the Fed took on interest rates in 2005–2006 affect people with adjustable-rate mortgages?
a. Their payments decreased. b. Their payments increased. c. The government assumed their payments. d. Their payments could not be changed.