In the presence of compensating wage differentials, explain why the consumption possibility frontier is not a good approximation of the utility possibility frontier.
What will be an ideal response?
When people make choices in labor markets that contain compensating differentials, people with the same utility will have different outcomes -- as those with "less pleasant" jobs are compensated by higher wages.
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The figure illustrates the market for bagels. If the number of bagels is cut from 20 to 10 an hour, the deadweight loss is ________
A) $0.50 a bagel B) -$5.00 an hour C) $0 an hour D) $5.00 an hour
A simultaneous rise in aggregate demand and fall in short-run aggregate supply will definitely
A) raise the price level, but there is not enough information to know how Real GDP will change. B) lower Real GDP, but there is not enough information to know how the price level will change. C) raise the price level and Real GDP. D) raise Real GDP, but there is not enough information to know how the price level will change. E) raise the price level and lower Real GDP.
In the absence of technological progress, we know with certainty that an decrease in the saving rate will cause which of the following?
A) decrease steady state consumption B) increase steady state consumption C) have no effect on steady state consumption D) decrease steady state consumption only if the decrease in saving exceeds the increase in depreciation E) decrease steady state consumption only if the decrease in saving is less than the decrease in depreciation
Related to the Economics in Practice on p. 10: Prior to joining the glee club, Anjelica spent most of her free time studying in the library. Once she joined the glee club, Anjelica spent her free time hanging out in karaoke bars with other glee club members. This change in behavior is best described by
A. the ceteris paribus error. B. the post hoc ergo prompter hoc fallacy. C. the problem of peer effects. D. the fallacy of logic.