Distinguish between the market wage and the marginal wage. Why is the marginal wage significant to an employer and to a labor union?
What will be an ideal response?
The market wage is the actual wage the employer pays to each individual employee. The marginal wage is the change in total wages paid to all workers when an additional employee is hired. Marginal wages are significant to employers because the hiring decision is based on a comparison of marginal wages and marginal revenue product. The concept is significant to unions because these organizations are interested in the collective welfare of their members, and the marginal wage is an indication of whether members as a whole are gaining or losing in terms of wages.
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Suppose that in Paraguay, one of the poorest countries in the Americas, only two of the goods that are produced can compete in world markets, tea and DVD players. Given this success in exporting, Paraguay
a. should specialize only in DVD players since tea production is an old industry. b. should specialize in the production of tea, since its people are probably too poor to buy DVD players. c. should stop exporting both goods and produce more food products for its people. d. is better off producing both goods in which it has a comparative advantage, relative to all other goods.
Which of the following causes the aggregate production function to shift up?
A) An increase in capital stock B) A decrease in the productivity of workers C) An improvement in technology D) An increase in the total efficiency units of labor
Which of the following is most likely to increase the exports of a country?
a. The government gives subsidies to firms that export goods or services. b. The government reduces the size of the budget surplus. c. Political instability within the country increases modestly. d. None of the above will increase exports.
Economists define the labor force to include:
A. only people who are working full time. B. people who are working. C. people who are not working but are actively looking for a job, and people who are working. D. all individuals of working age, regardless of whether they are working or looking for a job.