The minimum wage is an example of a price floor.
Answer the following statement true (T) or false (F)
True
The minimum wage is the lowest wage a firm can legally pay its employees. This fits the definition of a price floor.
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How does a decrease in the price of one good affect a consumer's budget constraint? How is the effect different from a decrease in the consumer's income?
What will be an ideal response?
The economy suffered a mild recession in 2001. Despite the recession, home sales and durable goods sales remained high. Which of the following is a plausible explanation?
A) The Fed caused a reduction in the federal funds rate to its lowest level in 40 years. B) Home building and consumer durable purchases are always high during a recession. C) Rising inflation encouraged many to invest in the real estate market. D) The Fed's pursuit of contractionary policy stimulated these markets.
Which of the following statements regarding price elasticity of supply and the length of time for adjustment is FALSE?
A) The longer is the time period for adjustment, the greater is the price elasticity of supply. B) The longer is the time period for adjustment, the less is the extent to which resources flow into (or out of) an industry through expansion (or contraction) of existing firms. C) The longer is the time period for adjustment, the greater is the extent to which entry or (exit) of firms increases or (decreases) production in an industry. D) The shorter the time period for adjustment, the greater is the price elasticity of supply.
All of the following are true of a perfectly competitive firm in long-run equilibrium except one. Which is the exception?
a. Its economic profit will be zero. b. Its accounting profit may be positive. c. It will be minimizing average total cost. d. It will be charging a price equal to marginal cost. e. Marginal cost is minimized.