In the efficiency wage model, an increase in productivity would
A. increase output but have no effect on the real wage.
B. decrease the real wage but have no effect on output.
C. have no effect on either output or the real wage.
D. increase output but decrease the real wage.
Answer: A
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Which of the following statements is true if interest rates were zero?
A) The demand for bonds increases because bonds will be a more attractive alternative to money. B) People will hold their wealth in the form of money rather than in bonds. C) Bonds and money will become perfect substitutes since both are non-interest earning assets. D) The supply of bonds will increase.
The opportunity cost of providing a public good to an additional individual is
A) infinite. B) zero. C) impossible to determine. D) high because of the exclusion principle.