“In all likelihood highly educated workers are the individuals who would earn high incomes even if they did not have as much education.” Evaluate
What will be an ideal response?
It is undoubtedly true that many highly educated workers have above-average abilities and motivation that would enable them to earn high incomes even without as much education. However, other things equal, evidence does point to the fact that the correlation between education and earnings is not entirely due to some other factor such as ability and motivation. Comparisons on a macro level demonstrate that societies with higher levels of education also have higher levels of productivity and living standards. Historically, our standard of living and productivity have risen with educational levels. On an individual level, anecdotal evidence suggests that education and training increase one’s skills and productivity and therefore, earning power. In other words, evidence seems to point to the fact that while intelligence and motivation may allow a person to earn above-average income without higher education, if that person also achieves a higher level of education, their earning power expands even further.
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The monopolistically competitive firm's economic profits tend toward zero in the long run. Why is this so?
A) Monopolistically competitive firm's are rarely able to maintain the corporate discipline necessary to sustain profits in the long run. B) If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders a corporate restructuring to pull the company back to a normal rate of return. C) In the long run, other firms will successfully offer substitutes for the profitable firm's product, and competition will eliminate economic profits. D) Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping competition at bay becomes very expensive.
Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. On the other hand, a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day. Using the concept of absolute advantage, which of the following statements is true? The United States:
A. has the absolute advantage in the production of both gloves and radishes. B. does not have the absolute advantage in the production of either gloves or radishes. C. has the absolute advantage in the production of gloves, but not radishes. D. has the absolute advantage in the production of radishes, but not gloves.
Suppose you have a choice between receiving a lump-sum payment of $10,000 today or four annual payments of $2,750 (with the first payment today). Of the following, which is the lowest annual interest rate at which you would prefer the lump-sum payment over the four annual payments?
a. 2% b. 5% c. 7% d. 10%
Suppose that a government agency is trying to decide between two pollution reduction policy options. Under the permit option, 100 pollution permits would be sold, each allowing emission of one unit of pollution. Firms would be forced to shut down if they produced any units of pollution for which they did not hold a permit. Under the pollution tax option, firms would be taxed $250 for each unit of pollution emitted. The regulated firms all currently pollute and face varying costs of pollution reduction, though all face increasing marginal costs of pollution reduction. Suppose the tax policy is adopted. A firm will be willing to pay the tax if $250 is less than or equal to:
A. the average cost of eliminating one unit of pollution. B. its average total cost of production. C. its marginal revenue. D. the cost of reducing its existing pollution by one unit.