Explain why nominal wages are a function of the expected price level
What will be an ideal response?
Workers and firms care about the real wage. Nominal wages are typically set for a period of time by contracts. Individuals will, therefore, be concerned about what the future price level will be when determining the nominal wage. When setting the nominal wage, individuals will form expectations of what the future price level will be. They will use this to help determine the nominal wage.
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Free market economies underproduce goods with positive externalities because
A) there are no benefits to the production of these goods. B) the additional social benefits are not taken into account by the marketplace. C) the additional social benefits cannot be measured. D) the additional social benefits are too small to matter.
Holding all other prices and money income constant, if the price of food rises, then the consumer will adjust her expenditures and
A) reach an optimum on a higher indifference curve. B) reach an optimum on a lower indifference curve. C) reach an optimum on the same indifference curve. D) her level of satisfaction may go up or down.
Refer to the information provided in Figure 6.10 below to answer the question(s) that follow.
Figure 6.10Refer to Figure 6.10. Kyle would increase his consumption of turkey sandwiches from 7 to 9 per week if their price fell from $6 to $4. This illustrates the idea of
A. consumer surplus. B. cross-price elasticity of demand. C. technical efficiency. D. the law of diminishing marginal utility.
A move from F to G represents a
A. change in quantity supplied.
B. change in supply.
C. increase in supply.
D. decrease in supply.