An industry utilizes capital and two types of labor. Unskilled labor is a substitute for capital while the skilled labor is complementary to capital. An increase in the price of capital will
A) cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
B) cause the wage of unskilled labor to rise relative to the price of skilled labor.
C) induce the firms in the industry to cut back on all levels—capital, unskilled and skilled labor.
D) cause the demand for skilled labor to rise and the demand for unskilled labor to fall.
B
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The table above gives the CPI basket for 2015. Suppose that 2015 is the reference base period
a) What is the cost of the CPI basket in 2015? b) What is the cost of the CPI basket in 2016? c) What is the CPI for 2015? d) What is the CPI for 2016?
Max has allocated $100 toward meats for his barbecue. His budget line and indifference map are shown in the above figure. If Max is currently at point e,
A) the absolute value of his MRS is less than the trade-off offered by the market. B) he is willing to give up more burger than he has to, given market prices. C) he is not maximizing his utility. D) All of the above.