An industry utilizes capital and two types of labor. Unskilled labor is a substitute for capital while the skilled labor is complementary to capital. An increase in the price of capital will
A. induce the firms in the industry to cut back on all levels-capital, unskilled and skilled labor.
B. cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
C. cause the demand for skilled labor to rise and the demand for unskilled labor to fall.
D. cause the wage of unskilled labor to rise relative to the price of skilled labor.
Answer: D
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Refer to Figure 15-12. What is the amount of consumer surplus if, instead of monopoly, the industry was organized as a perfectly competitive industry?
A) $21 B) $124 C) $186 D) $332
If the Fed wants to permanently lower interest rates, then it should raise the rate of money growth if
A) there is fast adjustment of expected inflation. B) there is slow adjustment of expected inflation. C) the liquidity effect is smaller than the expected inflation effect. D) the liquidity effect is larger than the other effects.
Explain the share-the-gains, share-the-pains theory. How does it differ from the capture hypothesis?
What will be an ideal response?
As more bananas are consumed, marginal utility decreases at
a. the same rate for all people, approaching but never reaching zero b. the same rate for all people, and eventually becomes negative c. different rates for different people, and for everyone, it approaches but never reaches zero d. different rates for different people, and eventually, for everyone, it becomes negative e. different rates for different people, and eventually reaches zero where it remains (it cannot be negative)