BMW recently decided to build a manufacturing plant in Shenyang, China. At this plant, BMW is able to take advantage of paying lower wages to its Chinese workers than it pays its German workers, but it also sacrifices the high levels of technical training possessed by its German workers. In deciding to open the Shenyang plant, BMW
A) faced no trade-offs because employing lower-wage workers increased efficiency.
B) eroded some of its competitiveness in the luxury car market because of its decreased cost of production.
C) faced a trade-off between higher cost and lower precision.
D) adopted a negative technological change because it replaced high-skilled workers with low-skilled workers.
Answer: C) faced a trade-off between higher cost and lower precision.
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According to the Solow model, given the levels of total efficiency units of labor and technology:
A) efficiency units of labor do not play any role in the determination of steady-state equilibrium level of GDP. B) there is a maximum fixed level of GDP that an economy can achieve by increasing savings. C) increases in the savings rate is the sole reason for sustained economic growth. D) increases in the rate of physical capital accumulation can be the sole reason for sustained economic growth.
Selling bonds to finance new government debt leads to an opportunity cost that is
A. Greater than when government debt is financed with taxes. B. The same as financing government debt with taxes. C. Less than when government debt is financed with taxes. D. Dependent on who buys the bonds.
Which statement is false?
A. According to the theory of the dual labor market, the rich stay rich and the poor stay poor. B. The dual labor market theory does not account for the huge middle level of occupations—such as nursing, teaching, and social work. C. Most poorer people tend to find jobs in the primary labor market, according to the theory of the dual labor market. D. None of the statements are false.
Equilibrium, in the short run, is achieved when:
a. differences in rates of return cause investors to purchase and sell currency and thereby change the spot rate of exchange. b. the government recognizes a problem and takes action to correct it. c. traders adjust their expectations to match reality. d. inflation falls to zero.