1) If prices rise by 4% in a year and nominal wages increase by only 2%, then re
ID: 1210448 • Letter: 1
Question
1) If prices rise by 4% in a year and nominal wages increase by only 2%, then real wages will
A) decrease by 6%.
B) decrease by 4%.
C) decrease by 2%.
D) increase by 2%.
2) Use the following labor market diagrams to answer the next question.
The tactics of inclusive unionism are shown in figure(s)
A) 5 only.
B) 3 only.
C) 4 only.
D) 1 and 2.
3) Use the labor demand data on the left and the labor supply data on the right in answering the next question.
Employment Marginal Revenue Product Product Price
Employment Wage Rate
The firm will maximize profits (or minimize losses) by employing
A) 5 workers.
B) 4 workers.
C) 3 workers.
D) 2 workers.
Labor Demand Data Labor Supply DataEmployment Marginal Revenue Product Product Price
Employment Wage Rate
Explanation / Answer
1. C) decrease by 2%.
Real wage = Nominal wage / Price level
2. D) 1 and 2
3. D) 2 workers because employment of 2nd worker provide additional revenue of 12 while creates cost of 11 in the form of wage. If more workers are hired then marginal revenue decreases while cost of employment remains the same.
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