The empirically observed backward-bending labor supply curve cannot arise from homothetic tastes.
Answer the following statement true (T) or false (F)
True
Rationale: Homothetic tastes can give rise to downward or upward sloping labor supply curves, but not both (which is what is required for a backward bending labor supply curve.)
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A perfectly competitive industry in long-run equilibrium is described as efficient because firms
a. produce at the low point on their average cost curve. b. produce where marginal cost yields a profit. c. earn no more than the cost of capital. d. are not profitable.
Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?
a. decrease the money supply b. increase government expenditures c. increase taxes d. All of the above are correct.