Exhibit 3-4 Supply curves
In Exhibit 3-4, which of the following could have caused the shift in the supply curve from S1 to S2?
A. Increase in demand.
B. Increase in materials cost.
C. Decrease in the number of suppliers in the market.
D. Decrease in wage rates.
Answer: D
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With respect to labor supply, the substitution effect means a
A) person increases his or her hours of labor in response to a higher wage rate. B) person decreases his or her hours of labor in response to a higher wage rate. C) person substitutes high paying work for low paying work. D) firm substitutes capital for labor.
If the U.S. can produce pizza for $5 each and barrels of beer for $25 each, and Germany can produce pizza for $7 each and barrels of beer for $21 each, then the U.S
A) a comparative advantage in the production of beer. B) an absolute advantage in the production of beer. C) a comparative advantage in the production of pizza. D) a comparative advantage in the production of beer and pizza.