The assumption that the magnitude of the slope of an indifference curve decreases moving to the right along the indifference curve is known as the assumption of
A) the price effect.
B) a diminishing marginal rate of substitution.
C) an increasing marginal rate of substitution.
D) an indifference curve effect.
B
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Refer to Figure 20-1. Based on the graph of the labor market above, if a minimum wage of $8 per hour is imposed, which of the following will result?
A) The quantity of labor demanded by firms will rise. B) The quantity of labor demanded by firms will fall. C) The unemployment rate will fall. D) Both A and C will occur.
If there is a negative externality, and the market output is 100 units more than the socially optimal output, then it follows that
A. the external costs associated with the negative externality are greater than the marginal private costs. B. the external costs associated with the negative externality are less than the marginal private costs. C. there is market failure. D. any tax imposed on the production of the output will bring about the socially optimal output. E. none of the above