First, explain what the PS relation represents. Second, explain why it has its particular shape

What will be an ideal response?


The PS relation illustrates the effect of changes in the unemployment rate on the real wage implied by the price-setting behavior of firms. Firms set prices as a markup over their marginal cost of producing goods. Given that the marginal cost is assumed to be independent of the level of employment (and, therefore, the unemployment rate), changes in u will have no effect on the price firms set and, therefore, on the real wage based on PS behavior.

Economics

You might also like to view...

Why do sellers pay all of a tax when supply is perfectly inelastic?

A) because a perfectly inelastic supply means that the demand is elastic B) because the government requires firms to collect the tax C) because a perfectly inelastic supply means that the quantity supplied is quite sensitive to a change in price D) because a perfectly inelastic supply means that suppliers will produce the same amount regardless of the price E) because in this case the price of the good that suppliers receive and keep does not change

Economics

Discount loans intended for banks that are not financially healthy are called

A) primary credit. B) secondary credit. C) seasonal credit. D) repo loans.

Economics

Which of the following is true for a firm that is a monopolist?

a. the firm will make an economic profit in the short run. b. the firm will produce a smaller quantity of output than what would be best from the viewpoint of ideal economic efficiency. c. the additional revenue that can be generated from an increase in output will exceed the firm's price. d. the firm can charge whatever it wants for its product since consumers have no alternatives.

Economics

Does voluntary exchange create wealth (value)?

What will be an ideal response?

Economics