Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action?
a. the law of supply
b. tea and coffee are complements
c. the substitution effect
d. the income effect
e. your nominal income has increased
C
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Suppose your economics professor earns an equal annual salary of $40,000. The professor loves teaching and would not quit her job if her pay were reduced to $15,000 per year. Your professor is earning annual economic rent of
A. $40,000. B. $25,000. C. $55,000. D. $15,000.
One disadvantage of using a tournament is that
A. tournaments are not able to identify the most productive workers. B. workers who view themselves as losing the tournament will quit providing effort. C. the winners of tournaments are typically overpaid. D. tournaments are more expensive than time rates or piece rates. E. no one will apply for tournament-style jobs.