"Wal-Mart is a low-wage firm and this indicates that it exploits its workers." Which of the following should cause one to question the validity of this statement?
What will be an ideal response?
No one is required to work for Wal-Mart and, therefore, it must attract workers by paying them more attractive wages than they could earn elsewhere.
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An effective agreement to divide up the market among firms selling products that are close substitutes
A) allows each firm to earn positive net revenue even though its marginal cost is greater than its marginal revenue. B) allows each firm to earn positive net revenue by preventing cooperation from reducing each firm's marginal revenue below its marginal cost. C) tends to keep each firm's price and marginal revenue above its marginal cost. D) tends to result in both higher prices and larger output.
Refer to Figure 9.2. Whenever a CD is sold, 5% of the revenue goes to the artist and the remainder of the revenue goes to the record company. The graph above depicts R, the total revenue from sales; (0.95)R, the record company's share; and C, the cost of producing the CD (which the record companies bears). At what quantity would the artist prefer to produce the CD?
A. 0
B. Q1
C. Q2
D. Q3
If you buy 10% more compact discs in response to a 20% increase in income, your income elasticity for compact discs is ______.
A. 0.5 B. 1.0 C. 2.0 D. 0.0
Why do markets exist?
a) Markets ensure that government does not intervene in the production of goods and services b) Markets provide self-sufficent people with public places for the exchange of ideas c) Markets ensure economic equity for all people d) Markets allow people to buy what they need to consume and sell the specialized goods and services they produce