Suppose firms in an industry hire unskilled labor and skilled labor. Unskilled labor is a substitute for capital and skilled labor is a complement with capital. A decrease in the real price of capital would
A) cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
B) cause the demand for unskilled labor to increase and the demand for skilled labor to decrease. The wage of unskilled labor would rise relative to the wage of skilled labor.
C) cause the demand for unskilled labor to decrease and the demand for skilled labor to increase. The wage of unskilled labor would decrease relative to the wage of skilled labor.
D) cause the demand for both kinds of labor to decrease. Wages rates of both kinds of labor would decrease too.
C
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When differences between nominal GDP and real GDP result due to price changes and nothing else is compared, an index is created called the
A) consumer price index. B) index of leading indicators. C) GDP deflator. D) inflation index.
Which of the following statements is (are) correct? Critics of the real business cycle model
a. question whether technology has ever been the cause of a recession. b. do not deny that some technology shocks affect many industries. However, they do not believe that there are enough of these shocks to explain recessions where output falls too as much as 10 percent below potential output. c. argue that aggregate supply changes drive most business cycles. d. All of the above e. None of the above
A decrease in demand is represented by:
a. a shift outward of the entire demand curve. b. a shift inward of the entire demand curve. c. a movement along the demand curve in a southeasterly direction. d. a movement along the demand curve in a northwesterly direction.
Assume a subsidy to buyers has been enacted in the market in the graph shown. With the subsidy, the buyers buy ________ units and pay ________ for each of them.
A. 100; $46 B. 100; $30 C. 150; $24 D. 150; $40