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Some of the People Advocating Large Increases in the Minimum

question 42

Essay

Some of the people advocating large increases in the minimum wage, use the theory of efficiency wages to counter the claim that large increases in the minimum wage increase unemployment.
a.What are efficiency wages?
b.What is likely to happen if the minimum wage were set equal to the efficiency wage? Explain.


Definitions:

Marginal Revenue

The supplementary income derived from the sale of one extra product or service unit.

Perfect Competition

A market setup where numerous small companies, offering indistinguishable products and having the freedom to enter or exit the market, results in firms accepting the market price without influencing it.

Equal to Price

Equal to price refers to a situation where a particular value, cost, or measure is identical to the price level of a good or service, indicating a direct correlation between the two.

Total Revenue

The total amount of money received by a company from sales of its products or services before any expenses are subtracted.

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