Economics questions (10 points for best answer!)?

[bothan]

These are the remaining 8 questions from my econ review sheet that I need help on. Any help is appreciated. :) 10 points for best answer!

1. An increase in the price of a resource would cause:

a. producers to substitute other inputs for the resource.
b. consumers to substitute other products for goods that increase in price as the result of the higher resource price.
c. an increase in the demand for products that use the resource intensely.
d. both a. and b. to occur.

2. Economic growth has the potential to eliminate:

a. all unemployment.
b. relative poverty.
c. absolute poverty.
d. both a. and b.
e. both a. and c.

3. When wages increase:

a, the quantity of labor supplied by an individual always increases.
b. the quantity of labor supplied by an individual always decreases.
c. the opportunity cost of leisure time increases.
d. the opportunity cost of leisure time decreases.
e. both a. and c. occur.

4. In a market economy, differences in incomes:

a. reflect the relative scarcity of resources.
b. provide individuals with an incentive to supply resources that are valued by others.
c. determine the income distribution among market participants.
d. all of the above are correct.

5. Because the poverty line is an absolute standard:

a. more families are pushed above the poverty line as economic growth moves the entire distribution of income upward.
b. the poverty rate has been fairly stable over the last 50 years.
c. an increase in the price of food will not have an effect on the poverty rate.
d. the poverty rate increases as an economy grows.

6. An increase in the interest rate will:

a. increase the amount of money borrowed by firms.
b. decrease the amount of money borrowed by firms.
c. have an ambiguous effect on the amount of money borrowed by firms.
d. have no effect on the amount of money borrowed by firms.

7. Job amenities:

a. have no impact on the supply of labor.
b. are not part of the compensation workers receive from employers.
c. help determine the position of the labor supply curve.
d. never affect the monetary wages paid to workers.

8. The substitution effect of a wage increase:

a. results in an increase in the quantity of labor supplied.
b. results in a decrease in the quantity of labor supplied.
c. has no impact on the quantity of labor supplied.
d. results in an increase in the quantity of leisure enjoyed.
e. results in both b. and d.

[forde]

As requested

1 d
An increase in the price of a resource would cause: producers to substitute other inputs for the resource & consumers to substitute other products for goods that increase in price as the result of the higher resource price.

(Option C is interesting when you consider the exceptional case of a Giffen good)

2 c.
Economic growth has the potential to eliminate: all unemployment and absolute poverty.

(Some people will always be relatively poor unless your have an egalitarian society, which then has problems with incentives.)

3c
When wages increase the opportunity cost of leisure time increases: (As it pays more to work this assumes working is the next best alternative to leisure)

The quantity of labor supplied by an individual always increases/ decreases? The use of the terms always stops me from believing either option is right as it may tend towards but would not always be true as worker may prefer consumption of goods and services to leisure.

4d
In a market economy, differences in incomes: reflect the relative scarcity of resources; provide individuals with an incentive to supply resources that are valued by others & determine the income distribution among market participants.

5a.
Because the poverty line is an absolute standard: more families are pushed above the poverty line as economic growth moves the entire distribution of income upward.

An increase in the price of food will have an effect on the poverty rate, the 'relative' poverty rate increases as an economy grows. Trends over the last 50 years stable or otherwise will not be 'caused' by the absolute poverty line.

6b.
An increase in the interest rate will decrease the amount of money borrowed by firms.

The opportunity cost of borrowing goes up so you tend to do something else instead like issue shares or collaborative working.

7c.
Job amenities: help determine the position of the labour supply curve.

Strikes have an impact on the supply of labour, without amenities employees may strike.
Amenities are part of the compensation 'total package' workers receive from employers.
'Danger money' for example can affect the monetary wages paid to workers.

8e.
The substitution effect of a wage increase: results in a decrease in the quantity of labor supplied & results in an increase in the quantity of leisure enjoyed.

(Normally this would be expect, however should consumption give more utility than leisure then the substitution effect would be marginal.)