A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $6 a bushel, the wage rate is $30, the farmer employs eight workers and the marginal product of the eighth worker is 4 bushels. What would you advise this farmer to do?
A. Reduce employment because the wage paid is more than the marginal revenue product.
B. Increase employment because the wage paid is less than the marginal revenue product.
C. Do nothing because the wage rate and the marginal product of the last worker hired are equal.
D. Reduce the product price so that the wage and marginal revenue product will be equal.
Answer: A
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Suppose an American worker can make 100 chairs or catch 900 fish per day. On the other hand, a Chilean worker, can make 40 chairs or catch 400 fish per day. The United States has an absolute advantage in the production of both fish and chairs. This means that the United States:
A. should produce only chairs and trade with Chile to get fish. B. should produce only fish and trade with Chile to get chairs. C. should take advantage of Chile by trading with them. D. can produce more fish and chairs than Chile given the same amount of workers.
Living in a world of scarcity involves trade-offs
a. True b. False Indicate whether the statement is true or false
A system of economic organization in which the ownership and control of productive capital assets rests with the state and in which resources are allocated through central planning and political decision making is called
a. socialism. b. a market economy. c. a corporate economy. d. capitalism.
In which of the following cases would there be an effect on the value of the U.S. consumer price index, but not on the value of the U.S. GDP deflator?
a. All of the truck tires that are produced by a certain company in South Korea are sold to the U.S. military, and the price of these tires decreases. b. All of the truck tires that are produced by a certain company in California are sold to the U.S. military, and the price of these tires decreases. c. Most of the bananas that are produced by a certain company in Honduras end up in U.S. grocery stores, and the price of these bananas increases. d. Most of the earth-moving machines that are produced by a certain company in Illinois are exported to other countries, and the price of these machines increases.