The Output Effect of an Increase in the Wage Comes

question 128

Multiple Choice

The output effect of an increase in the wage comes about because higher wages

• A) increase production costs, and final good prices will rise, reducing the quantity demanded of the product.
• B) increase production costs, and final good prices will rise, increasing the quantity demanded of the product.
• C) make labor less expensive as an input, leading firms to switch to labor as an input.
• D) make labor more expensive as an input, leading firms to switch to other inputs.

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Definitions:

Time Constraints

Limits or deadlines that define the amount of time available to complete a task or project.

Functional Fixedness

A cognitive bias that limits a person to using an object only in the way it is traditionally used, hindering problem-solving and creativity.

Hammer

A tool typically used to drive nails into, or pull nails from, some other object, generally involving a handle and a heavy head.

Mental Set

A tendency to approach situations in a fixed way based on previous experiences, potentially hindering problem-solving.