According to the Sticky-Wage Theory, Which Statement Is Consistent with an Unexpected

question 196

Multiple Choice

According to the sticky-wage theory, which statement is consistent with an unexpected increase in the price level?

• A) The real wage rises, and employment rises.
• B) The real wage rises, and employment falls.
• C) The real wage falls, and employment rises.
• D) The real wage falls, and employment falls.

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Definitions:

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Long-run Average Total Cost

The average cost per unit of output when all inputs, including capital, are variable, analyzed over a period when all factors of production can be adjusted.

Economies of Scale

The cost advantage that arises with increased output of a product, resulting in a decrease in the per-unit cost as the scale of production is enlarged.

Long-run Total Costs

The aggregate sum of all production costs for a company when all input factors are variable, analyzed over a prolonged period.