How is a firm's labor demand affected during a recession if wages are downwardly rigid?
What will be an ideal response?
The labor demand curve shifts to the left during a recession. With flexible wages, this leads to a fall in equilibrium wage and employment. However, if wages are downwardly rigid, firms are unable or unwilling to cut wages because of contractual restrictions or because of morale problems that would result from falling wages. As a result, they end up laying off more workers than they would have otherwise. With downwardly rigid wages, a leftward shift in the labor demand curve causes employment to fall by even more than it would if wages are flexible.
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Refer to Scenario 14-2. As a result of Kristy's deposit, Bank A's excess reserves increase by
A) $2,000. B) $8,000. C) $10,000. D) $50,000.
At the profit-maximizing level of output, the amount by which the firm can mark up price is:
A) inversely related to the price elasticity of demand for item in question. B) directly related to the price elasticity of demand for item in question. C) totally unrelated to the price elasticity of demand for item in question. D) equal to the ratio of the marginal and average costs of production.
Every country in the world has an independent central bank.
Answer the following statement true (T) or false (F)
Firms that charge a price for their output in excess of marginal cost in the short run
A. cannot find buyers for their output. B. will suffer huge losses. C. are charging a markup. D. are not maximizing profits.