You are running a small yard maintenance business for the summer. What do you expect to happen to the number of yards you can maintain in a day as you add workers if you don't purchase more capital equipment (like mowers and leaf blowers)?
What will be an ideal response?
It is likely that as you add workers, you will get incrementally less output out of each additional worker. Holding constant your materials, such as trucks, lawnmowers, etc., you'll almost surely be able to maintain more yards per day. But as you hire more workers, there might be waits for use of the tools, or for transportation to the next job. This is the prediction of the principle of diminishing returns.
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Explain the argument for why taxing externalities is an economically legitimate distortion
What will be an ideal response?
Refer to the graph shown. What level of output should the perfectly competitive firm produce to maximize profits?
A. 6. B. 4. C. 7. D. 8.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, an increase in unemployment may be represented by the movement from
A. B to A. B. A to C. C. C to D. D. B to D.
When the quantity of a good bought and sold is below the market equilibrium quantity, the loss of total surplus that results is called:
A. producer surplus. B. deadweight loss. C. total surplus. D. consumer surplus.