H. Ross Perot's famous claim in 1992 that the North American Free Trade Agreement (NAFTA) would cause a "great sucking sound" referred to
A. a rapid increase in U.S. exports to Mexico.
B. a huge increase in foreign direct investment in the United States.
C. a rapid increase in the wage inequality in Mexico.
D. an instant shift of jobs from the United States to the Mexico.
Answer: D
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Currently there is a market demand for toothpaste with baking soda in it. New medical studies show that baking soda has health benefits beyond clean teeth. After these studies are published, the market demand is such that at any price, consumers buy 10 more tubes of toothpaste than they used to. This is a parallel, rightward shift of the demand curve. Which of the following statements is true?
a. Because the curves are parallel, the elasticities don't change. b. Despite the fact that the curves are parallel, elasticity has increased. c. Even though the curves are parallel, the new one is more inelastic. d. There is no relationship between the curves and their elasticities. e. Elasticities on the new demand curve have increased at low prices and decreased at high prices.
Refer to Figure 12-15. Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run. Which of the diagrams in the figure depicts what happens in the industry as it transitions to a long-run equilibrium?
A) Panel A B) Panel B C) Panel C D) Panel D
This question has you determine the effect of a tax on labor on the long-run cost function. Consider a firm with the production function f(L,K) = LK. The wage rate and rental rate on capital are w and r, respectively. a
Using the Lagrangian, derive the long-run cost function for this firm. b. Suppose the government taxes labor at by an amount t per unit of labor. Rewrite the long-run cost function including the tax. Hint: the effective wage rate is now w + t. c. Compute the marginal effect of the tax on the long-run cost function. To do so, compute the partial derivative of the cost function with respect to t. Does an increase in the tax increase the cost linearly?
According to economist Paul Romer, economies that wish to experience growth must
A) invest most of their savings in national defense. B) invest in knowledge. C) drastically lower their standards of living. D) become command economies.