Suppose a union negotiates for its members a wage that is above the market-clearing wage. What problems does the union have to solve now? Explain
What will be an ideal response?
The higher wage implies there will be an excess of labor so the union must find a way to ration the jobs. The excess supply is due to two factors—the firms' quantity demanded for workers decreases and new workers are attracted into the industry due to the higher wage. Further, the higher labor costs are likely to encourage management to find ways to substitute other factors of production for labor.
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A firm is a price taker if it
A) always sells its output at the industry-determined price. B) takes consumer demand into consideration in setting its price. C) takes its production costs into consideration in setting its price. D) uses a pricing strategy to gain market share.
One advantage of a money system compared to a barter system is that
a. barter never works. b. money creates the need for banks. c. money is more efficient. d. everyone has money.
If aggregate demand increases in the intermediate range of the aggregate supply curve then the:
A. price level rises and real GDP falls. B. price level rises and real GDP rises. C. price level falls and real GDP falls. D. price level falls and real GDP rises.
Suppose Motorland's government imposes a tax of $1.50 per gallon of gasoline sold. With the tax, when the market is in equilibrium, the deadweight loss is
A) zero. B) $37,500 per month. C) $150,000 per month. D) $75,000 per month.