Question

1) The substitution effect occurs when wages rise because people tend to substitute more work in place of leisure.

True

False

2) A craft union represents workers

of a specific occupation.

in a specific industry.

who work specifically in the government sector.

3) Which of these is MOST likely to be a natural monopoly?

an ambulance service in a small town in Wyoming

Apple, Inc.

an automobile manufacturer with a national market

United Parcel Service (UPS)

who contract on a fee-for-service basis.

4) After World War II and through the Korean War, union membership constituted _____ of American workers.

10%

100%

50%

33%

5) Which statement is TRUE for a monopolistically competitive firm operating in the long run?

Price is equal to marginal cost.

The firm earns an economic profit.

Price is greater than marginal cost.

The firm's demand curve is highly inelastic.

Answer 1

1) Solution: True
Explanation: If wage increases, people are likely to substitute work in place of leisure as the opportunity cost of leisure also increases
2) Solution: of a specific occupation.
Explanation: The craft unions displays the workers with the similar abilities across different several industries
3) Solution: an ambulance service in a small town in Wyoming
Explanation: A natural monopoly arises as a result of the high fixed costs or start-up costs in a specific industry.
4) Solution: 33%
Explanation: The union membership constituted 33% of U.S. workers after World War II and through the Korean War
5) Solution: Price is greater than marginal cost.
Explanation: In the long run monopolistically competitive firm price equals ATC and exceeds marginal cost