In the long run, when there is immigration of labor and all domestic factors of production are mobile:
a. resources move out of the laborintensive industry into the other sectors of the economy.
b. the excess labor cannot be absorbed into the economy, and eventually workers will seek to emigrate.
c. the excess labor is absorbed, but it raises the unemployment rate and drives down wages, and the owners of capital are the clear winners.
d. the capitallabor ratio in each industry is unchanged, and the additional labor in the economy is fully employed.
Ans: d. the capitallabor ratio in each industry is unchanged, and the additional labor in the economy is fully employed.
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What relationship exists between marginal revenue and the elasticity of demand? Use this relationship to explain how a monopoly can increase its profit if demand is inelastic.
What will be an ideal response?
A corporate executive makes the following statement – "The company must keep hiring more workers up to the point where the marginal productivity of the last worker we hire is zero. This way we can maximize the total productivity of the firm"
Critically evaluate this statement. Also comment on whether this is the correct objective function for the firm.
Households and firms pay taxes to the government to:
a. increase their consumption spending. b. finance the country's import bill. c. increase their savings. d. improve their standard of living. e. finance government expenditures.
Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. When the weather is nice, it is difficult to find parking on summer afternoons. Otherwise, it is a great place. An efficient solution to the parking problem would be to
a. prohibit parking in the vicinity of the park. b. charge higher prices for parking at busy times. c. police the parking area and ticket cars that are parked illegally. d. do nothing.