The "backward bending" portion of the labor supply curve implies that
A. higher wages lead to fewer hours of work supplied.
B. the law of diminishing returns has settled in.
C. a minimum wage law is in effect.
D. higher wages lead to an increase in hours of work supplied.
Answer: A
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An 18 percent increase in the price of a small car results in a 10 percent increase in the quantity supplied. The price elasticity of supply is equal to
A) 1.80. B) 0.55. C) 0.75. D) 0.40.
An external market
A) should always replace internal markets. B) have problems that internal markets do not. C) should be used to discipline the internal market. D) fewer economies of scope.
In the macroeconomic model of aggregate supply and aggregate demand, price is:
A. calculated as a weighted average of the prices of all goods and services. B. the measure of the value of all goods and services produced by the economy. C. represented by GDP. D. None of these is true.
Pappy's Popcorn Emporium operates in a perfectly competitive industry and hires you as an economic consultant. Pappy's is currently producing at a point where market price equals its marginal cost. Its total revenue exceeds both its total variable cost and its total cost. You advise Pappy's to
A. raise its price so that it can increase its profit. B. cease production immediately because it is incurring a loss. C. continue to produce in the short run to maximize its profit. D. lower its price immediately in anticipation of new firms entering the industry.