1. When might the demand for labor shift outwards?
A. When wages fall
B. When labor productivity increases
C. When demand for the product falls
D. When the price of capital goods falls
2. When is an increase in investment most likely?
A. When interest rates rise
B. When managers become more optimistic about the economy
C. When costs are expected to rise
D. When revenues are expected to fall
3. When is the market capitalization of a business most likely to increase?
A. When the share price falls
B. When the profits are lower than expected
C. When the dividends are higher than expected
D. When the returns on assets other than shares rise
Ans 1. Option b
The labour demand curve is the value of marginal product of labour curve. It is calculated as price*marginal product of labour. So, increase in productivity increases the marginal product of labour shifting the labour demand curve outwards.
Ans 2. Option b
Increase in investment occurs when the buainess confidence is high. So, if the business managers are optimistic about the economy, they'll expect higher earnings in future and thus, increase investment.
Ans 3. Option d
Increase in return on assets of a business will increase investor confidence in the business, so, demand for shares of the business will increase due to which price of share will rise and market capitalisation which is the product of share price and number of shares outstanding will also increase.
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