Graphically illustrate (using the WS and PS relations) and explain the effects of a reduction in the minimum wage on the equilibrium real wage, the natural rate of unemployment, the natural level of employment, and the natural level of output
What will be an ideal response?
A reduction in the minimum wage will cause the nominal wage based on wage setting behavior to decrease; this is represented as an downward shift in the WS relation. As the nominal wage deceases, firms will respond by reducing the price level so we will observe no change in the equilibrium real wage. We will observe a decrease in the natural rate of unemployment and an increase in both the natural level of employment and output.
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Determinants of the price elasticity of supply are:
A. adjustment time, whether the good is a luxury or a necessity. B. availability of inputs, adjustment time. C. flexibility of the production process, whether the good is a luxury or a necessity. D. availability of inputs, whether the good is a luxury or a necessity. AACSB: Reflective Thinking
The presence of a price control in a market for a good or service usually is an indication that
a. an insufficient quantity of the good or service was being produced in that market to meet the public's need. b. the usual forces of supply and demand were not able to establish an equilibrium price in that market. c. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. d. policymakers correctly believed that price controls would generate no inequities of their own once imposed.
Each of the following can explain why an order could not been carried out as intended, EXCEPT:
a. incompetence. b. opportunism. c. impossibility. d. obedience.
If diminishing marginal utility holds, and a person consumes less of a good, then all else being equal
a. the price of the good will rise b. total utility will rise c. marginal utility will rise d. expenditure on the good will increase e. marginal utility will decline