Apply the concepts of menu costs and staggered price setting to the labor market
What will be an ideal response?
Wages are likely to be sticky, if it is costly for employers to monitor changes in the labor market, and if frequent wage adjustments have adverse effects on employee behavior. Since workers do not change jobs frequently in pursuit of the highest wage, there is little if any short-term penalty for wage persistence, nor reward for prompt wage adjustment. Even when it seems clear that wage adjustments are warranted, employers might hesitate to raise their labor costs above their competitors', or to lose employees by cutting wages before competitors do so.
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Comment on the following statement: "The Coase theorem implies that the contending parties will come to the efficient solution regardless of where rights are initially assigned."
What will be an ideal response?
If the quantity of tacos demanded is represented by the equation QD = 20 - 0.5P then the corresponding price of tacos is represented by the equation
A) P = 10 - 2QD. B) P = 40 - 2QD. C) P = 0.5QD + 10. D) P = QD + 40.