Graphically illustrate (using the WS and PS relations) and explain the effects of a reduction in the markup 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 markup will cause firms to reduce the price given the nominal wage. This will cause the real wage based on price setting behavior to increase; this is represented by a upward shift in the PS curve. This increase in the real wage will also occur with an decrease in the unemployment rate. So, the natural rate of unemployment will decrease and the natural level of employment and, therefore, output will increase. The equilibrium real wage will also be higher.
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The above figure shows that the maximum amount a person is willing to pay for the 400th pretzel
A) is greater than the marginal social cost of the 400th pretzel. B) is less than the marginal social benefit of the 400th pretzel. C) and the marginal social benefit of the 400th pretzel are both $2. D) is greater than the marginal social benefit of the 200th pretzel.
Use the above figure. The total revenue earned by this monopolistically competitive firm is
A) $2,560. B) $1,600. C) $480. D) $1,900.
Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer
a. True b. False Indicate whether the statement is true or false
Which of the following would tend to encourage more innovation in the United States?
A. Limits on the immigration of scientists and engineers B. Restrictions on the risk that venture capital firms can take C. Stricter enforcement of the patent laws D. Protection of manufacturing industries through tariffs and trade barriers