2156 - Review Session - MT1

Ariana gains utility from consumption and leisure. her utility function is: U(C,L)=(C+200)*L.

Ariana receives $500 each week from her grandmother. The most leisure she can consume in any given week is 100 hours.

What is Ariana's reservation wage per hour?

Ariana gains utility from consumption and leisure. her utility function is: U(C,L)=(C+200)*L.

Ariana receives $500 each week from her grandmother. The most leisure she can consume in any given week is 100 hours.

She is currently working in a job that offers $10/hour. How many hours will she choose to work at her optimal combination based on the basic-income leisure model?

Demand for labor will be inelastic if supply of substitute input is elastic.

• TRUE

• FALSE

Along the labour supply curve, the wage elasticity of labour demand is positive.

• TRUE

• FALSE

An increase in non-market income will have which of the following effects?

• An upward shift in the income constraint.

• 
  A downward shift in the income constraint.

• A clockwise rotation in the income constraint, making it steeper.

In the long run, which of the following statements is false?

• W=VMP_L​ and K=VMP_K​

• MP_L/MP_K=w/r

• MP_L=MP_K

If the value of the marginal product of labor exceeds the wage, then employing another worker

• Increases profit

• Increases the marginal product of labour

• Increases the value of the marginal product of labour

• Cuts costs

• TRUE

• FALSE

A simple monopsonist will pay the equilibrium wage to all workers.

• TRUE

• FALSE

Compensated elasticity is the same as substitution elasticity.

• TRUE

• FALSE