Michael Spence proposed the signaling hypothesis. According to this hypothesis,
A) workers signal their desire to work for a particular firm by the way they answer
questions in job interviews.
B) employers signal their preferences for the type of employee they wish to hire
through job ads and the questions they ask during job interviews.
C) employers view a college education as a signal that potential workers have certain
desirable qualities.
D) high wages are a signal that workers have skills that are highly valued by employers.
A decrease in the equilibrium quantity for a product will result
A) when the quantity demanded for the product exceeds the quantity supplied.
B) when there is a decrease in supply and a decrease in demand for the product.
C) when there is an increase in supply and a decrease in demand for the product.
D) when there is a decrease in demand and a decrease in the number of firms producing
the product.
Many economists criticize protectionism because it causes losses to consumers and
eliminates jobs in domestic industries that use protected products. Why, then, do some
people support protectionism?
A) The criticisms of economists are based on theory. In fact, protectionism increases
consumer and producer surplus as well as employment.
B) Supporters of protectionism in high-income countries believe that wages will fall as
a result of competition with firms from developing countries.
C) Supporters of protectionism believe free trade will cause their countries to lose their
comparative advantage.
D) Supporters of protectionism believe that free trade will lead to inflation.
Because consumers who have insurance provided by their employers usually only pay a
deductible for a visit to the doctor’s office
A) they demand a larger quantity of health care services than they would if they paid a
price that better represented the true cost of providing the service.
B) they demand a smaller quantity of health care services than they would if they paid a
price that better represented the true cost of providing the service.
C) the doctors supply a smaller quantity of health care services than they would if the
consumer paid a price that better represented the true cost of providing the service.
D) the insurance companies provide a larger quantity of health care services than they
would if the consumer paid a price that better represented the true cost of providing the
service.
Suppose a competitive firm pays a wage of $12 an hour and sells its product at $3 per
unit. Assume that labor is the only input. If hiring another worker would increase output
by five units per hour, then to maximize profits the firm should
A) not change the number of workers it currently hires.
B) lay off some of its workers.
C) hire the additional worker.
D) There is not enough information to answer the question.
In long-run perfectly competitive equilibrium, which of the following is false?
A) There is efficient, low-cost production at the minimum efficient scale.
B) Economic surplus is maximized.
C) Firms earn economic profit.
D) Economies of scale are exhausted.
If the selling price of a firm’s product is $200 and the estimated average cost of
producing this product is $150, what is the firm’s markup?
A) 75 percent
B) 33.33 percent
C) 25 percent
D) impossible to determine with the information given
Table 2-9
Table 2-9 shows the number of labor hours required to produce a canoe and a sailboat in
Guatemala and Honduras. What is Guatemala’s opportunity cost of producing one
canoe?
A) 1/6 of a sailboat
B) 2/3 of a sailboat
C) 6 sailboats
D) 7.5 sailboats
A possible advantage of a horizontal merger for the economy is that
A) the merging firms could avoid losses.
B) the merged firm might reap economies of scale which could translate into lower
prices.
C) the degree of competition in the industry will be intensified.
D) the government stands to collect more corporate income tax revenue.
The “underground economy” refers to
A) the buying and selling of goods that is concealed from the government.
B) the production of goods and services used by the government for covert spy
operations.
C) the sector of the economy that earns profits that are higher than average.
D) the formal sector of the economy in developing countries.
If a straight line passes through the point x = 8 and y = 4 and also through the point x =
12 and y = 6, the slope of this line is
A) negative 4 divided by 2.
B) two.
C) negative one half.
D) one half.
Figure 15-15 Figure 15-15 shows the
cost and demand curves for the Erickson Power Company.
If the government regulates Erickson Power Company so that the firm can earn a
normal profit, the price would be set at ________ and the output level is ________.
A) P1, Q4
B) P2, Q3
C) P2, Q2
D) P3, Q2