A professor in your microeconomics lectures derived a labor demand curve in the lecture
Given some reasonable assumptions, she showed that the demand for labor depends negatively on the real wage. You want to put this hypothesis to the test ("show me") and collect data on employment and real wages for a certain industry. You try to estimate the labor demand curve but find no relationship between the two variables. Is economic theory wrong? Explain.
What will be an ideal response?
Answer: This is a case of simultaneous causality. Since there is a supply of labor as well, the real wage depends on employment, which, in a market-clearing model, is determined by the intersection of supply and demand. In a Keynesian world with wait unemployment, you would expect a negative relationship between real wages and employment, given the capital stock and productivity.
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Suppose the United States exports cars to France and imports cheese from Switzerland. This situation suggests that
a. the United States has a comparative advantage relative to Switzerland in producing cheese, and France has a comparative advantage relative to the United States in producing cars. b. the United States has a comparative advantage relative to France in producing cars, and Switzerland has a comparative advantage relative to the United States in producing cheese. c. the United States has an absolute advantage relative to Switzerland in producing cheese, and France has an absolute advantage relative to the United States in producing cars. d. the United States has an absolute advantage relative to France in producing cars, and Switzerland has an absolute advantage relative to the United States in producing cheese.
If a monopolist claims his profit-maximizing markup factor is 3, what is the corresponding price elasticity of demand?
A. ?2.5. B. ?3.0. C. ?2.0. D. ?1.5.