List three reasons why nominal wages can be sticky in the short run
What will be an ideal response?
1. Long-term labor contracts fix the nominal wage for the duration of the contract.
2. Implicit contracts are informal arrangements between a firm and its workers in which a firm refrains from cutting wages during a recession in exchange for workers being willing to accept smaller wage increases during expansions.
3. Firms may refrain from cutting wages during recessions for fear that their best workers will quit to find jobs at other firms once an economic expansion improves conditions in the labor market.
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Suppose you are the manager of Good Smells, a home fragrance firm. To make your fragrance, you purchase orange peels from orange juice manufacturers. If the demand for orange juice decreases, this will cause the production of orange juice peels to ________ and the price of orange juice peels to ________.
A) decrease; fall B) increase; fall C) increase; rise D) decrease; rise
Homer and Marge both enjoy lasagna and wine. Homer's utility function is given by U(L,W) = 12L + 4W. Marge's utility function is given by U(L,W) = 2L + 2W. In each function, L stands for plates of lasagna and W stands for glasses of wine. Would Homer and Marge agree to a trade in which Homer gives Marge a plate of lasagna in exchange for two glasses of wine?
What will be an ideal response?
Which of the following statements is based on positive analysis?
a. Everyone should have the same access to medical care services regardless of the ability to pay for it. b. Pharmaceutical prices ought to be lower. c. Universal insurance coverage should be the goal of every country. d. Employers should be required to provide health insurance for all full-time workers and their dependents. e. High health care prices are one of the primary reasons that the U.S. spends more on medical care than other countries
Which of the following is true?
A. Frictional unemployment implies a lack of available jobs. B. During a recession, cyclical unemployment will be low. C. When an economy is at full employment, actual unemployment will be less than the natural rate of unemployment. D. When actual GDP equals potential GDP, the actual unemployment rate will equal the economy's natural rate of unemployment.