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    Wage Rate and other economic questions

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    1. Which of the following provides the best evidence that economies of scale exist?

    a. The per-unit costs on Excel Publishing Company's manuals fell following a large order from
    the government.
    b. Alpha-Beta Inc. raised its price 10% following a 5% increase in production costs.
    c. Widget Manufacturing doubled its production by opening a new plant that was identical to its
    old plant.
    d. The XYZ Co. increased production 25% following a 30% increase in all inputs.

    2. The substitution effect refers to the decision to :

    a. work fewer hours when the wage rate goes down.
    b. work fewer hours when the wage rate goes up.
    c. look for a better job when the wage rate goes up.
    d. look for a better job when the wage rate goes down.

    3. The income effect refers to the decision to:

    a. work more hours when the wage rate goes up.
    b. work more hours when the wage rate goes down.
    c. look for a better job when the wage rate goes up.
    d. look for a better job when the wage rate goes down.

    4. If the government chooses a stabilization price which is above a price trend line, the quantity supplied of agricultural goods will tend to be:

    a. below the quantity demanded.
    b. above the quantity demanded.
    c. equal to the quantity demanded.
    d. sometimes above and sometimes below the quantity demanded.

    5. Economic models:

    a. focus on every important aspect of economic reality.
    b. focus only on some aspects of a problem.
    c. do not involve value judgments because they are purely mathematical.
    d. are close representations of real-world economic reality.

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    Answer 1:
    a. The per-unit costs on Excel Publishing Company's manuals fell following a large order from the government.
    Explanation: Economies of scale refers to the savings achieved in the cost of production by larger enterprises because the cost of initial investment can be defrayed across a greater number of ...

    Solution Summary

    The solution provides an excellent response to the question being asked. It goes into a considerable amount of detail and explains the concepts being asked very well. The response answers a number of multiple choice questions and provides detailed explanation for the answers.

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