If the Relative Price of One Product Rises and Labor

question 72

Multiple Choice

If the relative price of one product rises and labor is
Mobile, then:

• A)the percentage increase in the equilibrium real wage will be exactly the same as the percentage increase in
• The relative price.
• B)the percentage increase in the equilibrium real wage will be lower than the percentage increase in the relative
• Price.
• C)the percentage increase in the equilibrium real wage will be higher than the percentage increase in the
• Relative price.
• D)the equilibrium real wage will not change.

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Definitions:

Marginal Tax Rate

The tax rate that applies to the last dollar of the tax base (income or wealth) earned.

Average Tax Rate

The ratio of total taxes paid to total income, representing the percentage of income that goes to taxes.

Income

The money received by a person or household from various sources like work, investments, or benefits, typically used for consumption, savings, and investing.

Equity

The value of an ownership interest in property, including shareholders' equity in a corporation, representing assets minus liabilities.