Ally Owns a Shoe Store

question 11

Multiple Choice

Ally owns a shoe store. The market wage is $10 per hour, and the cost of capital is $2 per week for every $1,000 of capital borrowed. Consider the isocost line associated with spending $8,000 per week, and let the y-axis be the amount of capital borrowed in $1,000s. Which of the following is not true?

• A)If Ally borrows no capital, she can employ 800 hours of work.
• B)If Ally employs no workers, she can borrow $4 million of capital.
• C)If Ally employs 600 hours of work, she can borrow $1 million of capital.
• D)If Ally employs 400 hours of work, she can borrow $3 million of capital.
• E)The slope of the isocost line is -5.

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Definitions:

Bid Rigging

An illegal agreement between parties to conspire to fix the outcomes of bidding processes to benefit all involved parties unfairly.

Predatory Pricing

The practice of selling a product or service at a very low price with the intent of driving competitors out of the market or creating barriers to entry for potential new competitors.

Meeting-The-Competition Defense

A legal defense allowing a business to justify certain behaviors, such as price fixing, by proving they were necessary to meet a competitor's prices.

Per Se Defense

A legal argument that, if proven, is sufficient by itself to defend the position of the defendant without the need for further evidence.