Explain why the labor supply curve is positively sloped. Explain why labor demand is downward sloping
What will be an ideal response?
It is assumed that additional labor is supplied at higher real wage rates. At a higher real wage rate, the price of leisure is greater in terms of foregone income. Along the labor demand curve, the real wage is equal to the marginal product of labor. Because of diminishing marginal returns, the marginal product of labor falls as the quantity of labor rises, so the real wage must also fall as the quantity of labor rises.
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In most cases, optimization in differences is faster and easier than optimization in levels because:
A) the former involves fewer steps to arrive at a conclusion. B) the former only focuses on the key differences between options and ignores things in common. C) the former focuses only on the benefits of an option, ignoring all calculations involving costs. D) the former uses simpler arithmetic tools in comparison to the latter.
According to Say's law, there cannot be overproduction of goods and services because:
a. planned aggregate expenditures sometimes fall short of total output. b. prices and wages are "sticky" or inflexible in the downward direction. c. demand creates its own supply. d. supply creates its own demand.
The proponents of rational expectations believe that
a. there will be a substantial time lag before people anticipate the eventual effects of a shift to a more expansionary macro-policy. b. macro-policies that stimulate demand and place upward pressure on the general level of prices will temporarily increase output and employment. c. the inflationary side effects of expansionary policies will be anticipated quickly, and therefore, even their short-run effects on real output and employment will be minimal. d. discretionary changes in macro-policy can be made in a manner that will reduce the economic ups and downs of a market economy.
In the absence of trade, a country produces at a point where its production-possibility curve is tangent to the highest possible community indifference curve.
Answer the following statement true (T) or false (F)