If Overall Labor Productivity Is Increasing at an Average Rate

question 28

Multiple Choice

If overall labor productivity is increasing at an average rate of 3 percent per year but by only
1 percent per year in the shoe manufacturing industry,then under the Kennedy-Johnson guidelines,wages of shoe workers should increase by ________ percent per year; prices of
Shoes should ________.

• A) 1; not change
• B) 1; increase by 1 percent per year
• C) 3; increase by 2 percent per year
• D) 3; not change
• E) 3; decrease by 2 percent per year

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Definitions:

Long-Run Equilibrium

A state in which economic forces such as supply and demand are balanced, and in the context of production, all inputs, including prices and wages, can be adjusted.

Free Entry

A market condition where there are no barriers for new competitors to enter the market and compete with existing firms.

Fashion Jewelry

Jewelry designed to complement the current fashion trends rather than serve as collectible or investment items, often made with non-precious materials.

Mineral Mining

The process of extracting minerals from the earth, which can include metals, gems, and other geological materials.