If the Productivity of Farmers Has Risen Substantially Over Time

question 110

Multiple Choice

If the productivity of farmers has risen substantially over time because of technological progress, and workers can move freely between being farmers and barbers, the neoclassical theory of distribution predicts that the real wage(s) of:

• A) both barbers and farmers should have remained constant over time.
• B) both barbers and farmers should have risen over time.
• C) farmers should have risen while the real wage of barbers should have remained constant.
• D) barbers should have risen while the real wage of farmers should have remained constant.

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Definitions:

Decision Making

The process of choosing among alternative courses of action or solutions to a problem in order to achieve a desired outcome.

Outside Supplier

An outside supplier is an external entity that provides goods or services to a company, typically not affiliated with the company’s internal supply chain.

Fixed Manufacturing Overhead

Costs related to the production process that do not change with the volume of production, such as salaries of manufacturing supervisors and rent for the factory.

Direct Labor

The wages and other costs for labor directly involved in the production of goods.