In a Competitive Labor Market, If a Firm Pays a Worker

question 43

Multiple Choice

In a competitive labor market, if a firm pays a worker less than that worker's VMP, then in the long run:

• A)the firm will earn positive economic profits.
• B)competing firms will hire the worker away.
• C)the worker will have no incentive to work hard.
• D)the supply of workers will fall.

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Definitions:

Discouraged Workers

Refers to individuals who have stopped looking for work because they believe no jobs are available for them.

Unemployment Rate

The part of the labor force comprising people who are not employed and are actively seeking jobs.

Unemployment Rate

The measure of the percentage of the labor force that is unemployed and actively looking for employment.

GDP

Gross Domestic Product, the total value of all goods and services produced within a country over a specified period.