Suppose You Received a 5 Percent Increase in Your Nominal

question 13

Multiple Choice

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

• A) Your real wage fell.
• B) Your nominal wage fell.
• C) Both your nominal and real wages decreased.
• D) Although your nominal wage fell, your real wage increased.
• E) Both your nominal and real wages increased.

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Definitions:

Decreasing-Cost Industry

An industry where the unit cost of production decreases as the industry's output increases, often due to economies of scale.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the number of units produced.

Long-Run Adjustments

Refers to changes that firms in an industry make in response to economic opportunities or constraints, involving adjustments in production capacity or resource utilization over time.

Marginal Revenue

The extra revenue obtained by selling an additional unit of a product or service.