Ben Is Willing to Work for $4/hour and an Employer

question 208

Multiple Choice

Ben is willing to work for $4/hour and an employer is willing to hire Ben for $7/hour. Which statements is TRUE?

• A) A minimum wage of $7.50/hour would prevent this mutually beneficial exchange.
• B) Minimum wages do not prevent mutually beneficial exchanges.
• C) A minimum wage of $4.50/hour would prevent this mutually beneficial exchange.
• D) A minimum wage of $3.50/hour would prevent this mutually beneficial exchange.

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Definitions:

Rivals

Competitors within the same market that vie for customers and market share by offering similar goods or services.

Reaction Curve

Relationship between a firm’s profit-maximizing output and the amount it thinks its competitor will produce.

Nash Equilibrium

A concept in game theory where no participant can gain by unilaterally changing their strategy if the strategies of the others remain unchanged.

Nash Equilibrium

A concept in game theory where no player can benefit by changing their strategy while other players keep theirs unchanged.