Based on our understanding of the labour market model presented in Chapter 7, we know that a reduction in the markup will causeSelect one:A.an increase in the equilibrium real wage.B.a reduction in the natural rate of unemployment and no change in the real wage.C.a reduction in the equilibrium real wage.D.an increase in the natural rate of unemployment.
Question
Based on our understanding of the labour market model presented in Chapter 7, we know that a reduction in the markup will causeSelect one:A.an increase in the equilibrium real wage.B.a reduction in the natural rate of unemployment and no change in the real wage.C.a reduction in the equilibrium real wage.D.an increase in the natural rate of unemployment.
Solution
Based on the labour market model presented in Chapter 7, a reduction in the markup will cause a reduction in the natural rate of unemployment and no change in the real wage. So, the correct answer is B.
Here's why:
-
The markup is the difference between the price of a good or service and its cost of production. In the context of the labour market, it's the difference between the wage that firms pay their workers and the marginal product of labour.
-
When the markup decreases, it means that firms are getting less profit from each unit of labour. This could be because of increased competition, which forces firms to lower their prices, or because of a decrease in the cost of production.
-
According to the labour market model, when firms get less profit from each unit of labour, they will demand less labour at any given wage. This shifts the labour demand curve to the left.
-
At the same time, the supply of labour remains unchanged. So, the equilibrium level of employment decreases, which means that the natural rate of unemployment decreases.
-
However, the real wage, which is determined by the intersection of the labour demand and supply curves, does not change. This is because the decrease in labour demand is exactly offset by the decrease in employment, leaving the real wage unchanged.
Similar Questions
For this question, assume that Y = N. Based on our understanding of the labour market model presented in Chapter 6, we know that a reduction in the markup will cause:Question 15Select one:a.no change in the natural level of output.b.no change in the natural level of employment.c.a reduction in the natural level of employment.d.an increase in the natural level of output.e.a reduction in the natural level of output.
Based on our understanding of the labour market model presented in Chapter 6, we know that an increase in the minimum wage will cause:Question 11Select one:a.a reduction in the equilibrium real wage.b.no change in the equilibrium real wage.c.an increase in the equilibrium real wage.d.no change in the natural rate of unemployment.e.a reduction in the natural rate of unemployment.
Based on wage setting behaviour, we know that an increase in the unemployment rate will causeSelect one:A.a reduction in the real wage.B.an upward shift of the WS curve.C.an increase in the real wage.D.no change in the real wage.
According to the labor supply and demand model, as the real wage rises,ResponsesA workers are willing to provide less labor, and employers are willing to provide more jobs.workers are willing to provide less labor, and employers are willing to provide more jobs.B workers are willing to provide less labor, and employers are willing to provide fewer jobs.workers are willing to provide less labor, and employers are willing to provide fewer jobs.C workers are willing to provide more labor, and employers are willing to provide fewer jobs.workers are willing to provide more labor, and employers are willing to provide fewer jobs.D workers are willing to provide more labor, and employers are willing to provide more jobs.
Which of the following will cause a decrease in the demand for labor at any given real wage?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.