Explain the impact of capital deepening on workers.
What will be an ideal response?
Capital deepening is an increase in the amount of capital per worker. In a full-employment economy under the assumption that the supply of labor is fixed, an increase in capital shifts the production function upwards because more output can be produced with the same amount of labor. Firms will therefore increase their demand for labor because the marginal benefit from hiring labor will increase. The real wage also rises. Thus, workers will enjoy higher wages, and total GDP in the economy will increase.
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The price elasticity of supply for a product will be 2 if a
A. 1% decrease in price causes a 0.2% decrease in quantity supplied. B. 2% decrease in price causes a 2% decrease in quantity supplied. C. 2% decrease in price causes a 1% decrease in quantity supplied. D. 1% decrease in price causes a 2% decrease in quantity supplied.
A monopoly is
A) a price taker. B) able to ignore the demand for its product when setting its price. C) able to set the price for its product. D) able to earn only a normal profit in the long run. E) a firm with no marginal revenue curve.
Refer to the figure above. If A forms a customs union with C, the value of trade diversion will be
A) $0. B) $10,000. C) $20,000. D) $40,000.
The percentage change in quantity demanded of good A divided by the percentage change in price of good B is the formula for
a. cross-price elasticity of demand. b. income elasticity of demand. c. zero elasticity of demand. d. infinite elasticity of demand.