Suppose several United States software design companies compete with each other in a perfectly competitive environment. If one company decides to move some of its offices to a low-wage country in order to reduce operating costs, then:
A. the company that moves to the low-wage country will earn a positive economic profit in the long run.
B. the company that moves to the low-wage country will soon return to the United States.
C. the other companies will still be able to remain profitable while operating solely in the United States.
D. other companies will have an incentive move to the low-wage country in order to remain competitive.
Answer: D
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a. automatically in a capitalist economy b. when every possible Pareto improvement is exploited c. when all markets are monopolized d. if income is fairly distributed e. whenever a voluntary transaction takes place
Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $15 and the per-unit wage, w, is $125, then the average fixed cost of using 16 units of capital and 25 units of labor is:
A. $12. B. $56. C. $9. D. There is insufficient information to determine the average fixed costs.
The concept that a student is enjoying the benefits of police protection even though she does pays taxes is called
A) the free-rider problem. B) the negative externality principle. C) the principle of rival consumption. D) the principle of anti-trust.
If the average variable cost curve is below the marginal cost curve, then
A. marginal costs can be either increasing or decreasing. B. marginal costs must be decreasing. C. marginal costs must be increasing. D. average variable costs must be decreasing.