Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.

A surplus of labor is eliminated by ________ in the real wage rate and a shortage of labor is eliminated by ________ in the real wage rate

A) an increase; a decrease B) a decrease; an increase C) an increase; an increase D) a decrease; a decrease E) None of the above answers is correct because shortages and surpluses are eliminated by changes in the demand for labor and the supply of labor, not the wage rate.

One way to prevent workers from shirking is to

A) hire only workers who are predisposed toward shirking. B) hire only workers who are predisposed toward not shirking. C) reduce monitoring to zero. D) pay workers a fixed fee.