Suppose MPL = 0.5 ? (q/L) and MPK = 0.5 ? (q/K). In the long run, the firm will hire equal amounts of capital and labor
A) all of the time.
B) only when w = r.
C) only when w = 0.5 ? r.
D) at no point in time.
B
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Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause
A) a surplus of wheat. B) a higher equilibrium price and higher equilibrium quantity of wheat. C) fall in the market clearing price of corn, a substitute for wheat. D) a higher equilibrium quantity, but a lower equilibrium price of wheat.
One of the characteristics of the cap-and-trade system is that
A. there is no way to ensure that pollution is reduced below some allowable total amount. B. it is more expensive than a command-and-control system. C. it is inflexible, and does not respond well to differences in the marginal cost of pollution reduction. D. it reduces the economic damage that would have been done by a command-and-control system.
During the financial crisis of 2007–2009, the interest rate spread on mortgage-backed securities over Treasury bills
A. increased tremendously. B. increased moderately. C. decreased moderately. D. decreased tremendously.
Which of the following statements pertains to macroeconomics?
A. Because the minimum wage was raised, Mrs. Olsen decided to enter the labor force. B. A decline in the price of soybeans caused farmer Wanek to plant more land in wheat. C. National income grew by 2.7 percent last year. D. The Pumpkin Center State Bank increased its interest rate on consumer loans by 1 percentage point.