Exam 2: Homework Review
A bakery is one of many that operate in the bread industry. The market demand curve for bread is downward-sloping. The bakery incurs fixed costs and has an upward-sloping marginal cost curve. Which of the following statements is correct? A) The bakery faces a flat demand curve. B) The bakery's supply curve is horizontal. C) The bakery always makes a positive economic rent. D) The bakery can ensure that the price is above its average cost.
A
As the hourly wage rises, the worker's best response function (with effort on the vertical axis and wages on the horizontal axis) becomes flatter because: A) The disutility of work at the level chosen by the worker increases. B) The worker's goodwill towards the employer increases. C) The marginal effect of effort on production is diminishing.
A
Consider an employee with a reservation wage of $6 an hour. The employee chooses an effort level between zero and one. Which of the following statements regarding her best response curve is correct? A) The best response curve describes the effort that the employee would choose for each level of the hourly wage. B) The best response curve is upward-sloping and convex. C) The curve crosses the horizontal axis at the origin. D) The average effort per hour is increasing in wages.
A
The diagram depicts the demand curve of a product. Assume that there are 100 potential buyers who can choose to purchase one unit each. Based on this graph, which of the following statements is correct? A) The diagram demonstrates the Law of Demand. B) At an output of 20, the willingness to pay of all 20 consumers who buy the product is £8,000. C) A quarter of the buyers are not willing to pay more than £2,000 for the product. D) The firm should sell all 100 units in order to maximise its profits.
A
The figure depicts the model of wage setting by the union. Which of the following statements is correct? A) Workers exert higher effort under union bargaining than when the firm selects its profit-maximising wage level. B) The workers' reservation wage under union bargaining when there is no union voice effect is w_2. C) The reservation wage falls when there is union voice effect. D) Even with the union voice effect, the profit would never be higher than that attainable at A.
A
The figure shows the demand and supply curves in the salt market. The government now decides to impose a specific (fixed) tax of T per kg of salt, to be paid by the suppliers. Which of the following statements is correct? A) The supply curve shifts up in a parallel manner. B) The new equilibrium price is P* + T. C) Consumers definitely bear most of the tax burden. D) The tax raised is T × Q*.
A
The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to an introduction of a new technology. Assume that the number of bakeries remains constant. Which of the following statements is correct? A) The bakeries' marginal cost of production has fallen. B) Excess demand at the original price has led to the fall in the equilibrium price. C) The more elastic the demand curve, the larger the fall in price. D) There has been an increase in demand.
A
The following diagram shows the consumer and producer surplus in the market for bread. Consider changes in the elasticities of the demand and supply curves. Assuming that the market equilibrium output and price are unchanged, which of the following statements is correct? A) A less elastic supply curve will lead to a larger producer surplus. B) A more elastic demand curve will lead to a smaller producer surplus. C) A less elastic demand curve will lead to a smaller consumer surplus. D) Consumer and producer surplus do not depend on the elasticities of the demand and supply curves.
A
Which of the following are factors that contribute to a firm's diseconomies of scale? A) Difficulty of monitoring workers' effort as the number of employees increases. B) The firm needing to double the capacity of a pipe that transports its fuel when the production level is doubled. C) Fixed costs such as lobbying. D) Network effects of its output goods.
A
Which of the following statements regarding the marginal rate of substitution (MRS) and the marginal rate of transformation (MRT) of a profit-maximising firm is correct? A) The MRS is how much in price you are willing to give up for an incremental increase in the quantity, holding profits constant. B) The MRT is how much in price the consumers are willing to give up for an incremental increase in the quantity consumed, keeping their utility constant. C) If MRT > MRS then firms can increase their profit by increasing output. D) The MRT is the slope of the isoprofit curves.
A
The figure depicts the labour market model. Which of the following statements are correct at outcome X? A) The firms' wage offered is at the point of tangency between their isocost line and the workers' best response function curve for effort. B) The firms' price and output are at the point of tangency between their isoprofit curve and their demand curve. C) Once they have the job, employees are better off not exerting any effort in their work. D) The unemployed can get a job by offering to work for a wage lower than the equilibrium wage.
A, B
The figure shows a bakery's marginal and average cost curves, and its isoprofit curves. The bakery is a price-taker in a large bread market. Suppose the current market price is P_1. Based on this information, which of the following statements is correct? A) The bakery would be minimising its loss at A. B) If the bakery is not yet in the market then it would not enter the market. C) If the bakery is already in the market, then it would always immediately exit the market because it is making a loss. D) The bakery would be better off raising its price up to its AC level.
A, B
Which of the following statements are true for a competitive market in which all firms have upward-sloping marginal cost curves? A) If more firms enter the market, the market price will fall, and so will profits. B) The marginal cost is always equal to price. C) The average cost is always equal to the price.
A, B
Which of the following statements regarding monopoly and perfectly competitive markets are correct? A) In a monopoly market, the firm is a price-maker. B) In a perfectly competitive market, there is little advertising. C) In a monopoly market, owners receive no economic rent. D) In a perfectly competitive market, firms invest in research and innovation.
A, B
A U-shaped average cost function implies that which of the following are possible: A) Average cost is higher than the marginal cost. B) Marginal costs increase but average costs decrease. C) Average cost is lower than the marginal cost.
A, B, C
Angela currently has a job with an hourly wage rate of £10, and her disutility from employment is £1 an hour. If she loses this job, then she can get a job with hourly wage rate of £8 after 36 weeks (her disutility of employment remains at £1 per hour). In the interim period, she can claim unemployment benefits for 20 weeks at £175 per week. Assume that a week contains 35 hours that she can work and get paid for. In order to calculate the employment rent she receives in her current job, which of the following are correct: A) If she lost her job, the employment rent per hour that she would lose during the weeks when she would receive unemployment benefit is £4. B) If she lost her job, the employment rent per hour that she would lose during the weeks when she would not receive unemployment benefit but hasn't found a job is £9. C) If she loses her job, the total loss of employment rent over the entire period during which she would receive unemployment benefit is greater than the employment rent she would lose in the first 8 weeks in the new job.
A, B, C
In which of the following situations could the competitive market not be Pareto efficient? A) The product sold is a differentiated good. B) In the labour market, where workers' effort levels are non-verifiable. C) When production of a good traded creates air pollution. D) When there are a large number of buyers and sellers of the good, and the trade and production does not affect any third party.
A, B, C
Which of the following are measures that can reduce principal-agent problems? A) A black box in the car that measures the speed of the driver. B) An excess payment for the first £100 in your travel insurance. C) Increasing the number of workers in a factory. D) Paying part of the chief executive's bonus in the company's shares.
A, B, D
In a perfectly competitive market in which the demand is Q = 30 - P and the supply is Q = 2P - 3 : A) The equilibrium price is P = 11. B) The producer surplus at equilibrium is 230. C) The consumer surplus at equilibrium is 180.5.
A, C
The figure depicts the labour market when there has been a negative aggregate demand shock. Which of the following statements is correct? A) Firms may be reluctant to make the nominal wage adjustment from B to C. B) The demand increase from C to X is ensured by a price cut. C) Rather than wait for the wage and price adjustments, the central bank can aid demand recovery by reducing the interest rate. D) The government can aid demand recovery by an increase in its spending, funded by higher taxes.
A, C
The figures depict four possible combinations of average cost (AC) and marginal cost (MC) curves. The horizontal axis is the output Q. Which of the following statements correctly matches the corresponding diagram? A) The firm exhibits diseconomies of scale. B) The firm has a positive fixed cost. C) The firm's unit cost of production is constant. D) The firm exhibits constant returns to scale.
A, C
Which of the following markets can generally be considered to be competitive? A) The market for milk. B) Etsy, a platform where unique handicrafted products are offered for sale. C) The market for plane tickets from London to Tokyo. D) The market for tickets to a particular rock concert.
A, C
Which of the following events would contribute to economies of scale? A) Large supermarkets being able to drive down the cost of purchasing milk as it increases its scale of business. B) The expansion of the workforce requiring extra layers of management for better performance monitoring. C) A merger of two firms leading to savings on the costs of HR, IT, and legal departments. D) The higher the number of users of Windows 10, the more likely it is that Microsoft will be able to achieve a higher sale of its operating system.
A, C, D
Consider an economy with homogeneous firms and homogeneous workers. Which of the following statements are true? A) If there is involuntary unemployment then there is income inequality. B) If there is involuntary unemployment then firms are able to employ workers at their reservation wage. C) The government should aim to eliminate involuntary unemployment. D) The government cannot eliminate involuntary unemployment.
A, D
The figure depicts the labour market when there has been a negative aggregate demand shock. Which of the following statements are correct? A) The derived demand for labour is N_X at X, and is N_B at B. B) The demand-deficient unemployment at B is N_L - N_B. C) The equilibrium level of unemployment is N_L - N_B. D) N_L - N_X and N_L - N_B are the levels of involuntary unemployment at X and B, respectively.
A, D
Which of the following aspects of a university lecturer's job would the employer like to see done but cannot be covered in a contract (or if they are, cannot be enforced)? A) The type or quality of job that students get immediately after graduation. B) Number of hours of lecturing. C) Number of students to supervise for their dissertations. D) Approachability for the students.
A, D
Which of the following statements are correct? A) A market is in equilibrium if the actions of buyers and sellers have no tendency to change the price or the quantities bought and sold. B) The market-clearing price is the price at which all supplies are sold out. C) Buyers are price-takers if they have bargaining power. D) In a competitive equilibrium, both buyers and sellers are price-takers.
A, D
Which of the following statements regarding Karl Marx are correct? A) He acknowledged that the capitalist economy was the most dynamic economic system in human history. B) He observed that the transactions in the labour market were between equals: nobody is in a position to order anyone else to employ or be employed. C) He thought that the power wielded by employers over workers was a core strength of capitalism. D) He thought that capitalism, by organising production and allocation in anonymous markets, created atomised individuals instead of integrated communities.
A, D
Which of the following statements regarding piece rate wage contracts are correct? A) They provide an employee an incentive to exert effort. B) They are widely used in modern economies. C) Piece rate wage contracts are easy to implement in modern knowledge- and service-based economies. D) A piece rate wage contract would be inappropriate for kitchen staff at a restaurant.
A, D
Consider the case where a government introduces a specific (per-unit) tax on cigarettes. As a result, the government succeeds in reducing the consumption level. Which of the following statements is correct? A) This is a bad policy as it creates a deadweight loss. B) The cost of collecting taxes must be considered when assessing the success of this policy. C) The more elastic the demand for cigarettes, the larger the tax revenue. D) The tax rate should be determined so as to maximise tax revenue.
B
Consider the demand curve shown in the figure. Suppose that the unit cost (the cost of producing each pound) is $C at all levels of output. Which of the following statements is correct? A) Total revenue doubles when quantity doubles. B) Total cost doubles when quantity doubles. C) Profit is always increasing in Q. D) Profit is always increasing in P.
B
In the equilibrium of the labour market: A) There is excess demand for workers to make sure the workers put in sufficient effort. B) The greater the level of labour productivity, the higher the real wage. C) The price-setting curve lies above the average product of labour.
B
Maria earns $15 per hour in her current job and works 40 hours a week. Her disutility of effort is measured as $1 per hour of work. In the case that she loses her job, she receives $5 per hour unemployment benefit. Additionally, being unemployed has psychological and social costs which is a disutility equivalent to $2 per hour. Then, A) The employment rent per hour is $3. B) Maria's employment rent if she can get another job with the same wage rate after 44 weeks of being unemployed is more than $6,160. C) Maria's employment rent if she can only get a job at the same wage rate after 44 weeks of being unemployed is less than $7,700.
B
The figure depicts the price-setting curve. Assume that the average product of labour λ is given. Based on this figure, which of the following statements is correct? A) At C, the markup is below the firm's profit-maximising level. B) To go from A to B, the firm would be raising its price. C) The firm's profit is higher at A than at C. D) D is not a feasible choice for a firm.
B
The figure describes the effect of immigration on unemployment in the labour market. The labour market equilibrium is at A and C before and after the influx of immigration, respectively. Based on this figure, which of the following statements is correct? A) All incumbent workers are unaffected while the labour market adjusts. B) All incumbent workers are no worse off in the new equilibrium. C) The unemployment rate is unchanged in the new equilibrium. D) Firms claim a higher markup in the new equilibrium.
B
The figure shows the demand and supply curves in the salt market. The government imposes a sales tax of 30% on the price of salt, to be paid by the suppliers. As a result, the equilibrium quantity falls from Q* to Q^T. Which of the following statements is correct after the tax has been implemented? A) Consumer surplus is A + B. B) Gains from trade are A + B + D + F. C) Tax revenue is B + C. D) Deadweight loss is B + C + D + E.
B
The figure shows the demand and supply curves in the salt market. The government now decides to impose a sales tax of 30% on the price of salt, to be paid by the suppliers. Which of the following statements is correct? A) The tax is borne wholly by the producers. B) Both consumer surplus and producer surplus decrease. C) The gains from trade equal the sum of consumer surplus and producer surplus. D) The deadweight loss equals the loss of consumer surplus.
B
The following figure depicts an employee's best response to wage when the expected unemployment duration is 44 weeks. Which of the following statements is correct? A) In order to induce an extra effort of 0.1 per hour at any particular wage level, the employer needs to increase the hourly wage by $3. B) The slope of the best response curve is the employer's marginal rate of transformation of higher wages into worker effort. C) A fall in the unemployment rate would reduce the reservation wage to below $6. D) The employer would still have to pay $24 per hour to have the effort level of 0.8 even if there is an increase in the unemployment benefit.
B
A firm produces 24 units of output with 10 workers and 4 machines. Which of the following statements are correct? A) If the firm produces 48 units of output with 20 workers and 4 machines, then the firm's technology exhibits constant returns to scale. B) If the firm produces 10 units of output with 5 workers and 2 machines, then the firm's technology exhibits increasing returns to scale. C) If the firm produces 30 units of output with 15 workers and 6 machines, then the firm's technology exhibits decreasing returns to scale. D)
B, C
A profit function, drawn on a graph with quantity on the horizontal axis and profit on the vertical axis, depicts a firms' profit for different outputs. Which of the following statements are correct? A) A profit function plots the profit along an isoprofit curve. B) At the peak of the profit function, the profit level equals that of the isoprofit curve that is tangent to the demand curve. C) Assuming no fixed costs of production, the profit function goes through the origin. D) The profit function is always positive.
B, C
In a perfectly competitive market, if demand increases because consumers are richer, and supply increases because marginal costs decrease, then in the new equilibrium: A) Prices will be always be lower. B) Quantity traded in the market will always be higher. C) Total surplus will always be higher.
B, C
In which of the following cases would a firm be maximising profits? A) The firm pays its employees their reservation wage. B) The firm minimises the cost per unit of effort. C) The firm maximises the efficiency units per dollar of wage cost. D) The firm selects the lowest possible (least steep) isocost line. (Assume hourly wage is on the horizontal axis and effort per hour is on the vertical axis.)
B, C
The government has instituted a subsidy (paid to the buyers) of 3000 pounds per electric car bought in 2017. The electric car industry is competitive. Which of the following statements is true? A) The deadweight loss caused by the subsidy is minimal if the elasticity of supply is infinite. B) Buyers gain more from the subsidy than sellers if demand is more inelastic than supply. C) The final price paid by consumers of electric cars will increase by 3000 if supply is perfectly inelastic.
B, C
Which, if any, of the following statements are true? A) Employment rents rise with the value of outside opportunities. B) Employer provision of onsite childcare raises the employment rent. C) If the expected duration of unemployment is 40 weeks, but unemployment benefit is only paid for the first 8 weeks, then the employment rent is smaller than without the presence of unemployment benefit.
B, C
The following diagram shows the market demand curve of Apple Cinnamon Cheerios, the isoprofit curves of the producer firm, and the firm's profit function curve. Based on the graph, which of the following statements are correct? A) The highest profit that the firm can make is $60,000. B) The profit-maximising choice for the firm is where the highest attainable isoprofi tcurve is tangent to the demand curve. C) The profit-maximising choice for the firm is where its marginal rate of substitution between the price charged and the quantity produced is equal to its marginal rate of transformation. D) The profit-maximising choice for the firm is at the peak of its profit function curve.
B, C, D
The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. Based on this figure, which of the following statements are correct? A) At A, the firm makes positive profits. B) The firm makes the same profit at B and D. C) Profit margin is the same at B and D. D) The slope of the isoprofit is zero at D.
B, D
The figure depicts the labour market model, which is currently at point X. In which of the following cases would the employment rate rise? A) A higher unemployment benefit. B) Better monitoring of employees' effort. C) A higher degree of product differentiation. D) Higher labour productivity.
B, D
Ceteris paribus, in which of the following cases would the wage-setting curve shift up? A) Better monitoring by the employer. B) A lower unemployment rate. C) A more generous unemployment insurance scheme. D) A sudden influx of immigration
C
Consider a worker's best response curve in the labour discipline model. Currently the firm chooses to pay £12 per hour to minimise the cost of effort, which induces an effort level of 0.6 from the worker. Now consider a rise in the unemployment benefit. Then: A) At the wage rate of £12 per hour the worker will now exert more than 0.6 of effort. B) The firm can lower the wage rate to below £12 to maintain the effort level of 0.6. C) The firm's new wage offer that minimises the cost of effort will be higher than £12. D) The firm's maximum units of effort per dollar of wage cost will be higher than before the rise in the unemployment benefit.
C
If unemployment benefits increase: A) A worker's effort increases because the employment rent increases. B) Effort decreases because the disutility of effort decreases. C) The employment rent will fall unless the firm raises the wage.
C
The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. At C, the firm sells 32 cars at $5,440. The profit associated with isoprofit A is $63,360. Based on this information, which of the following statements are correct? A) The firm can sell its 33rd car at $5,440. B) The total revenue from selling 32 cars is $63,360. C) The total cost of producing 32 cars is $110,720. D) The marginal cost of producing the 32nd car is $3,460.
C
The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. Based on the figure, which of the following statements is correct? A) The consumer surplus in the profit-maximising outcome is $105,300. B) The producer surplus in the Pareto efficient outcome is $133,960. C) The deadweight loss in the profit-maximising outcome is $20,640. D) The firm's profit in the Pareto efficient outcome is $100,000.
C
The figure depicts the efficiency wage equilibrium of a worker and a firm. According to this figure: A) At C, the marginal rate of substitution (MRS) between higher wage cost and higher effort exceeds the marginal rate of transformation (MRT). B) At B, the MRS is higher than the MRT. C) The firm would maximise its profits by paying an hourly wage that is $6 above the worker's reservation wage. D) The firm is able to increase its profits from those attained at A by inducing the worker to exert higher effort in return for a higher wage.
C
The figure shows a bakery's marginal and average cost curves, and its isoprofit curves. The bakery is a price-taker in a large bread market. Based on this figure, which of the following statements is correct? A) At a price of P_3, the bakery will choose to operate at C. B) At B, the bakery makes zero profits. C) At A, the bakery would be making a loss. D) If the market price is P_2, then the bakery can undercut this price to capture a higher market share.
C
The figure shows the wage-setting curve and the real wage w*. Which of the following statements is correct? A) The participation rate is 76%. B) The employment rate is 95%. C) The unemployment rate is 5%. D) 4% of the population is unemployed.
C
The following diagram depicts a firm's isoprofit curves and demand curve, given the economy-wide demand. Which of the following statements is correct? A) The higher the markup, the higher the profit. B) The firm would still be choosing B even with a less elastic demand curve. C) The isoprofit curves would be steeper for lower W. D) If there is a rise in W, then the firm would produce at a point to the right of B.
C
The market demand curve of a particular good is downward-sloping. Based on this information, which of the following statements is correct regarding a price-taking firm producing that good? A) The demand curve faced by the firm is downward-sloping. B) The firm chooses the price that equals its marginal cost. C) The firm chooses its output such that the marginal cost equals the price. D) A price-taking firm cannot be profit-maximising.
C
There are five students who are looking to buy one second-hand textbook each. Their willingness-to-pay are £5, £6, £8, £12, and £15, respectively. Based on this information, which of the following statements is correct? A) The student with a willingness-to-pay of £15 is the richest. B) Their willingness-to-pay indicates an upward-sloping demand curve. C) To sell three books, the maximum price that can be charged is £8. D) If a seller is one of many identical sellers and his reservation price is £8, then he is guaranteed to sell his textbook.
C
Which of the following statements about the price-setting curve is correct? A) The price-setting curve depicts the firms' profit-maximising price level for different levels of economy-wide employment. B) Firms have to pay a higher real wage when the employment rate is higher. Therefore the price-setting curve is upward-sloping. C) At points below the price-setting curve, the firms are setting prices too high compared to their profit-maximising level. D) The reduction in competition from Europe due to Brexit would result in the UK's price-setting curve shifting up.
C
Which of the following statements best describes the game played by the employer and the employee in the labour discipline model? A) The game is a simultaneous game in which the employer chooses the wage level and the employee chooses the effort level simultaneously. B) The game is a one-off game in which the wage and effort levels are determined once and for all. C) The worker selects the effort level that balances his desire to keep his job with his desire to not exhaust himself on the job. D) The employer will attempt to maximise the firm's profits by offering a wage equal to the worker's reservation wage.
C
Which of the following statements regarding employment contracts are correct? A) The firm is required to state exactly what it needs the employee to do in an employment contract. B) The firm needs to specify exactly how much effort employees are expected to put into their job. C) Employees' effort levels cannot be the basis of an enforceable contract. D) Employment contracts are incomplete as they can only specify things that both the employees and the business owner care about.
C
Which of the following statements regarding labour unions and wage bargaining is correct? A) The bargaining curve can be above or below the wage-setting curve. B) A labour union can set both the wage level and the employment level. C) Unions may choose to restrain their use of bargaining power. D) The unions' bargaining power comes from their ability to shut down firms.
C
Which of the following statements correctly identify who is the principal and who is the agent? A) In a public limited company, the managers are the principals and the shareholders are the agents. B) In a contract to buy an essay from an online provider, the essay writer is the principal and the student is the agent. C) In a contract between a football club and its star player, the club is the principal and the player is the agent. D) In an Airbnb contract, the owner and the traveller are both principals and agents.
C, D
A shop produces and sells 100 luxury hampers a day at £80 each. When it cut the price to £64 it increased its sale to 116 hampers a day. Which of the following statements is correct? A) The elasticity of demand is approximately 1.25. B) The demand for the hampers is elastic. C) The marginal revenue is greater than zero. D) The shop should raise its price in order to increase profits.
D
Consider an economy with firms selling differentiated products, where the only input to production is labour. Which of the following statements is correct? A) Firms make no economic rent. B) Workers receive no employment rent. C) Firms choose the level of nominal wage that corresponds to the workers' maximum effort. D) The more inelastic the demand curve faced by the firm, the higher the markup set by the firm.
D
Consider the labour discipline model applied to two countries, a high-wage country and a low-wage country. Assume that the high-wage country has a higher unemployment benefit. Consider a firm producing the same product in both countries. Which of the following statements is correct? A) The workers' best response curve in the high-wage country is to the left of that in the low-wage country. B) The efficiency wage offered in the low-wage country is higher than that in the high-wage country. C) Firms would make lower profits in the low-wage country than in the high-wage country. D) The threat of outsourcing from the high-wage country to the low-wage country would raise the workers' best response curve in the high-wage country.
D
The diagram shows the demand and the supply curves for textbooks. Based on this figure, which of the following statements is correct? A) At a price of $12, all 40 books will be sold. B) At a price of $6, there is an excess demand of 4 books. C) There are sellers willing to give away their textbooks for free. D) The Nash equilibrium price is $8.
D
The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operating in the market, but you do not know their cost structure (i.e. their average cost and marginal cost curves). Based on this information, which of the following statements is correct? A) At a price of €2.50, each bakery will sell 26 loaves each. B) In equilibrium, each bakery supplies 18 loaves each. C) At a price of €1.50, all of the bakeries would be making a loss. D) A bakery's marginal cost of producing the 21st loaf is €2.
D
The figure shows a demand curve for Cheerios. Based on this figure, which of the following statements is correct? A) If the price was $2 then the total demand would be 40,000 pounds. B) If the firms want to sell at least 24,000 pounds then they need to charge at least $3. C) The demand curve suggests that to double the amount sold, the price needs to be halved. D) There is no demand if the price is set above $7.20.
D
The figure shows the market demand curve for bread, together with original and new supply curves, where the curve has shifted due to new bakeries entering the market. All bakeries are identical, and there are no entry costs. Which of the following statements is correct? A) The bakeries' marginal cost of production has fallen. B) The supply of bread has become less elastic. C) With the fall in price, the bakeries now make a loss. D) New bakeries will continue to enter until the price equals their average cost.
D
Thomas earns £12 per hour in his current job and works 36 hours a week. He loves his job and puts in his maximum effort with no disutility. In fact, Thomas earns extra utility worth £3 per hour from camaraderie, status, and enjoyment of the job. If he loses this job Thomas has two choices. Either he is able to be self-employed, which earns him £7 an hour for 36 hours a week of work but also gives him disutility equivalent to £2 per hour, or he can be unemployed and receive an unemployment benefit of £150 per week. Thomas is expected to be able to find another job similar to his current one in 24 weeks. Ceteris paribus, which of the following changes results in an increase in his employment rent? A) He receives a pay rise of £2 per hour but his enjoyment of the job decreases to £1 per hour. B) He reduces his working week for the current job to 32 hours a week, which increases his enjoyment from the job by an extra £1 per hour. C) The unemployment benefit decreases to £120 per week. D) Self-employment would only bring in 32 hours of work a week.
D
Which of the following statements regarding average cost and marginal cost of a firm is correct? A) Average cost is the slope of the total cost curve. B) Marginal cost is the slope of the average cost curve. C) Marginal cost is always higher than average cost. D) When marginal cost equals average cost, the slope of the average cost curve is zero.
D
Which of the following statements regarding employment rents are correct? A) They are the costs you have to pay for your employment. B) It equals the wage you receive in your employment. C) Higher employment rents make workers more likely to quit their job. D) Employers can use high employment rents to exert power over employees.
D
Which of the following statements regarding the cost structure of the film (movie) industry is correct? A) The marginal cost of producing additional copies of a film is high. B) The price is above marginal cost due to lack of substitutes. C) Industry regulators should cap the price of a DVD at its marginal cost. D) The quantity sold in the film industry is inefficient.
D
