To maximize profit, a firm ________. A. uses the quantity of land at which the rental rate equals the value of marginal product of land B. balances the rental rate of capital against the wage rate of labor C. uses the quantity of capital at which the marginal revenue equals the value of marginal product of capital D. uses the quantity of capital at which the suppliers’ expected profit equals the value of marginal product of capital

An individual’s supply of labor curve is ________.

A. horizontal at the market wage rate

B. upward sloping as the wage rate rises

C. upward sloping at low wage rates but becomes downward sloping at high wage rates

D. vertical at the standard number of hours a person works per day

A firm’s demand for labor is determined by ________. A. the market wage rate B. the price of the good that the firm produces and the wage rate it pays C. the marginal product of labor and the market wage rate D. the price of the good that the firm produces and the marginal product of labor

An individual’s supply of labor curve is ________. A. horizontal at the market wage rate B. upward sloping as the wage rate rises C. upward sloping at low wage rates but becomes downward sloping at high wage rates D. vertical at the standard number of hours a person works per day

Use the following information to work Problems 7 and 8. In August 2013, the exchange rate between the U.S. dollar and the Brazilian real was 3.125 real per dollar. In the same month, the price of a Big Mac was 23 real in Sao Paulo and $3.99 in New York. Brazil’s interest rate was 14.25 percent per year and the U.S. interest rate was 1 percent per year.

Does interest rate parity hold between Brazil and the United States? If interest rate parity does hold, what is the expected rate of appreciation or depreciation of the Brazilian real against the U.S. dollar? If the Fed raised the interest rate while the Brazilian interest rate remained at 14.25 percent a year, how would the expected appreciation or depreciation of the real change?

Hong Kong is much more densely populated than is the United States. Compare the rental rate on land in Hong Kong with that in Chicago. Explain why the percentage of commercial buildings that are new is lower in downtown Chicago than in Hong Kong.

In a competitive labor market for bakers, the equilibrium wage rate ________.

A. rises if bakers become more productive

B. falls if the supply of bakers decreases

C. rises if the market price of bakery items falls

D. rises if new technology makes it easier for anyone to be a baker

Which of the following statements is correct?

A. The closer the Lorenz curve is to the line of equality, the more unequal is the distribution of income.

B. The farther the Lorenz curve is from the line of equality, the more unequal is the distribution of income.

C. If the Lorenz curve crosses the line of equality the distribution of income is more unequal at high income levels than at low income levels.

D. The Lorenz curve for wealth is closer to the line of equality than the Lorenz curve for income

Hong Kong is much more densely populated than is the United States. Compare the rent on land in Hong Kong with that in Chicago. Can you explain why the percentage of commercial buildings that are new in downtown Chicago is less than that in Hong Kong?

A monopoly that price discriminates ________.

A. benefits buyers because it offers the good at a variety of prices

B. gains because it converts consumer surplus to economic profit

C. uses resources more efficiently than would a competitive market

D. enables buyers to maximize their consumer surplus

What is the fundamental assumption upon which the Law of Supply is based?

In recent years, as the gap between the rich and the poor has increased, the Lorenz curve has ________.

A. shifted away from the line of equality

B. not changed, but there has been a movement down along it

C. shifted closer to the line of equality

D. not changed, but there has been a movement up along it

In the prisoners’ dilemma game, each player ________.

A. consults the other player to determine his best action B. chooses the best outcome for the other player C. chooses the best outcome for himself D. chooses the best outcome for both players together

In an advertising prisoners’ dilemma game, ________.

A. both firms will advertise and end up with lower profits than if neither advertises

B. only one firm will advertise because the other firm sees the advertising expenditure as a waste

C. the two firms agree on the total advertising budget and split it equally

D. neither firm will advertise because both realize that it lowers profit