1. In a competitive industry, suppose the marginal revenue product (MRP) of the last doughnut baker hired is $35, the MRP of the last bagel baker hired is $15, and a bakery must pay doughnut bakers $40 a day and bagel bakers $10 per day. To maximize profits the bakery should hire: A) more doughnut bakers and less bagel bakers. B) less doughnut bakers and more bagel bakers. C) less of both doughnut bakers and bagel bakers. D) more of both doughnut bakers and bagel bakers.
2. If two inputs are complementary an increase in the price of one input will: A) decrease the demand for the other input. B) increase the demand for the other input. C) increase the quantity demanded for the other input. D) have no effect on…show more content… A) Mail-order catalog sales rise, thus increasing the demand for workers in the mail-order business. B) Sport utility vehicles increase in popularity, thus increasing the demand for the workers who make them. C) A decrease in the price of lumber decreases the cost of building homes, thus increasing the demand for construction workers. D) A technological change increases output per worker in the computer industry, thus increasing the demand for computer workers.
15. A merger between one firm and another firm that is its supplier is known as a: A) horizontal merger. C) conglomerate merger. B) vertical merger. D) parallel merger.
Use the following to answer questions 16-17:
It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. Operators of hydroelectric generating plants on the river find that they must clean up the river's water before it flows through their equipment.
16. The above situation is an example of: A) an external economy. C) the exclusion principle. B) a spillover cost. D) a spillover benefit.
17. Which of the following would be most appropriate for dealing with this problem? A) Levy a tax on the consumers of paper products and use the tax revenues to conduct research on new energy sources. B) Levy a tax on the consumers of electricity and use the tax revenues to subsidize the consumers