In 1913, the Ford Motor Company decided to pay its employees $5 a day. This wage was significantly higher than what any other organization offered. Henry Ford believed that this wage would make his employees happier, increase their productivity, and lower employee turnover. Economists would say that Mr. Ford offered his employees
a. a union.
b. an efficiency wage.
c. a diminishing rate of marginal return.
d. a leisure wage.
b
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Assume there is a decrease in the market demand for a good sold by price-taking firms that are initially producing the profit-maximizing level of output. How will the market adjust over time?
A) Firms will enter the market, causing price to rise until losses are eliminated. B) Firms will enter the market, causing price to fall until positive profits are eliminated. C) Firms will exit the market, causing price to rise until losses are eliminated. D) Firms will exit the market, causing price to fall until positive profits are eliminated.
The Arrow-Pratt measure of risk aversion is
A) negative if a person is risk averse. B) greater than one if a person is risk averse. C) negative if a person is risk loving. D) None of the above.
The presence of a learning curve may induce a decision maker in a startup firm to choose
A) low levels of output to exploit economies of scale. B) high levels of output to exploit economies of scale. C) low levels of output to shift the average cost curve down over time. D) high levels of output to shift the average cost curve down over time. E) to produce more than one output.
When economists and government officials speak about the money supply, they usually mean M2
a. True b. False