Micro 2

An effective minimum wage policy in a competitive market will increase unemployment and increase the total earnings of labor only if the demand for labor is Responses A relatively inelastic B relatively elastic C unit elastic D greater than the supply E positively related to the wage rate

A

Good X is produced in a perfectly competitive industry in long-run equilibrium. If the consumption of good X generates positive externalities, the private market will produce Responses A less than the socially optimum amount of good X B more than the socially optimum amount of good X C the socially optimum amount of good X D good X only if the government grants a subsidy for the production of good X E good X only if the government levies a corrective tax on the production of good X

A

A firm's decision to hire a factor of production DOES NOT depend on which of the following? The price of the product produced by the factor input The average product of the factor input The price of the factor input The demand for the product the factor produces The marginal product of the factor input

B

The monopsonist's marginal factor (resource) cost curve for labor is Responses A above the labor supply curve because the product price is found on the demand curve above where marginal cost equals marginal revenue B above the labor supply curve because to hire more workers the firm must raise the wage for all workers C below the labor supply curve because the firm is a wage taker D below the labor supply curve because of diminishing marginal returns to labor E below the labor supply curve because to sell additional units of output the firm must lower its product price

B

When the marginal cost curve lies below the average total cost curve, it is true that as output increases Responses A marginal cost is decreasing B marginal cost is increasing C average total cost is decreasing D average total cost is increasing E average variable cost is decreasing

C

Which of the following best explains why a firm's short-run marginal cost curve shifts down when it purchases new, more efficient equipment and experiences an increase in its total cost? Responses A The situation represents an exception to the law of diminishing returns. B The average total cost curve shifts upward as a result of the equipment purchase, and there is a movement up along the marginal cost curve. C The equipment purchase is a fixed cost, and the new equipment will cause a reduction in the cost of producing each additional unit. D The average variable cost curve shifts upward as a result of the equipment purchase, and the marginal cost curve shifts downward.

C

As the population of a country ages, the demand for health care is projected to increase. As a result, the health care industry is likely to experience all of the following EXCEPT Responses A an increase in demand for health care workers B an increase in demand for medicine C an increase in the quantity of health care workers supplied D an increase in the wages of health care workers E a decrease in the prices of medicine

E