What is an example of the substitution effect?
A. The firm expands output when production costs fall.
B. The firm hires more labor when the wage falls because labor has become relatively cheaper compared to the price of other factors of production.
C. Workers choose to provide more hours of labor when the wage rate decreases.
D. More labor is hired as long as the marginal product of labor is positive.
E. The firm expands output when production costs increase.
Answer: B
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Which of the following could explain an increase in the equilibrium wage rate for a particular job?
a. a decrease in the amount of training needed to perform this job b. an increase in the amount of risk associated with this job c. a decrease in the amount of risk associated with this job d. an improvement in the working conditions associated with this job e. increased migration of workers to this geographic location
During the 1992 presidential campaign, H. Ross Perot made much of the various "special interests" which lobby in Washington, D.C. How might an economist view this? Which specific market breakdown may occur if there is lobbying? Relate your answer to the study of monopoly and oligopoly