What factors can lead the real wage rate to be above its full-employment equilibrium level?
What will be an ideal response?
There are at least three reasons why the real wage rate might be above its equilibrium level. First, firms might pay an efficiency wage, which is a wage rate set above the full-employment equilibrium wage rate in order to induce greater work effort from workers. Second, a minimum wage law might set a minimum wage that is above the full-employment equilibrium wage rate. Finally, a union might negotiate a wage rate that is above the full-employment equilibrium level.
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In a closed economy, if taxes fall and consumption rises, then private saving must fall
a. True b. False Indicate whether the statement is true or false
A firm's Lerner Index:
A. is the amount by which its price exceeds its marginal cost, expressed as a percentage of its price. B. is the amount by which its marginal cost exceeds its average cost. C. is the amount by which its average cost exceeds its marginal cost. D. is the value of its profit.