When the Possibility for Strongly Efficient Contracts Occurs, What Will

question 30

Multiple Choice

When the possibility for strongly efficient contracts occurs, what will happen?

• A) The union and firm negotiate over the employment level but not over the wage.
• B) The union and firm negotiate over the wage level but not over the employment level.
• C) The labor demand curve must be vertical.
• D) Isoprofit lines must be horizontal.
• E) Isoprofit lines are parabolas that open upward.

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Definitions:

Alpha

A threshold value in hypothesis testing that determines the level of significance, usually set to 0.05 or 0.01.

Type I Error

An error in hypothesis testing that occurs when the null hypothesis is wrongly rejected, falsely indicating a significant result.

Two-tailed Hypothesis

A hypothesis test that considers both directions of an effect, allowing for the possibility of difference in either direction from the null hypothesis.

Critical Values

Specific points on the scale of a test statistic beyond which we reject the null hypothesis, crucial in hypothesis testing to determine the significance of the results.