1. In the short-run when at least one factor is fixed, adding a variable factor such as one more worker should only be done if that worker can make the firm money, which is the same as saying that the diminishing MRP of labor must be greater than or equal to the marginal cost of hiring the worker once the worker is hired.
a. True
b. False
2. West Coast Customs must outsource some of its production processes if the cost of the capital (equipment) used by the outsource firm is greater than the MRP that could be obtained by West Coast Customs if it purchased the capital (equipment) for its own use.
a. True
b. False
3. Greater access to global markets that increases product demand will increase the marginal revenue product of labor and lead to higher wages.
a. True
b. False
4. Even without increasing international trade, increasing demand for high skilled products would tend to cause high-skilled labor wages in the U.S. to increase relative to wages of low-skilled U.S. workers.
a. True
b. False
5. Today's immigrant's tend to be relatively less educated and low-skilled and tend to come from Latin American and Asian countries in the hope of receiving higher wages, which has the effect on low-skilled labor wages in the U.S. as would free trade with labor abundant nations and zero immigration.
a. True
b. False
6. Hiring an additional unit of labor in a period involves a benefit-cost based decision, assuming the firm wants to maximize profits.
a. True
b. False
7. If capital owners are suddenly faced with capital controls that keep them from investing in "go-go" investments in foreign countries and instead require them to invest only in the U.S., the returns to capital will increase and everybody will be better-off.
a. True
b. False
8. Overall, outsourcing leads to job losses and lower production and consumption possibilities for all nations.
a. True
b. False
9. Exports push wages up while imports push them down, thus increased international trade will affect industries that have a comparative advantage unfavorably while less efficient industries will expand and grow.
a. True
b. False
10. If a tractor costs a lot more in China than in the U.S., China will import tractors and drive the price of tractors down in China while at the same driving up the price of tractors in the U.S. This process can continue until the cost of tractors is equal in the two countries.
a. True
b. False