Suppose That Airline Workers Are Laid Off During a Recession

question 248

Multiple Choice

Suppose that airline workers are laid off during a recession because of an unspoken agreement between airline workers and airline executives that wages will not be reduced. This example is consistent with the

• A) relative-wage explanation of unemployment.
• B) explicit contract explanation of unemployment.
• C) implicit contract explanation of unemployment.
• D) efficiency wage explanation of unemployment.

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Definitions:

Short-Run Supply Curve

A graphical representation showing the quantity of goods that producers are willing and able to sell at different prices over a short period of time, during which at least one of the firm's inputs is fixed.

Diminishing Marginal Returns

A principle in economics where increasing one factor of production, while keeping others constant, will yield lower additional output.

Price Ceiling

A legal maximum price that can be charged for a good or service, typically set by government to protect consumers.

Demand Curve

An image that graphically shows the relationship between an item's selling price and the quantities that consumers are interested in buying.