Suppose a Firm Is Contractually Obligated to Pay Workers $25

question 109

Multiple Choice

Suppose a firm is contractually obligated to pay workers $25 per hour despite the fact that the market-clearing wage is $19 per hour. If there are 500 qualified applicants but only 350 job openings, it is likely that:

• A) the firm will hire 350 workers at $25 per hour and 150 workers at $19 per hour.
• B) the firm will go bankrupt.
• C) jobs will have to be rationed in some way, and the firm may use non-job-related qualities to do so.
• D) the market eventually will clear at a wage rate between $19 and $25.

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