When Wage Differentials Are Observed in Competitive Labour Markets, the Neoclassical

question 97

Multiple Choice

When wage differentials are observed in competitive labour markets, the neoclassical theory of labour markets would predict:

• A)market discrimination.
• B)a difference in the value of marginal product of labour
• C)that wages will converge over time
• D)that wage differences reflect social status

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Definitions:

Government Spending

Expenditure by the government on goods, services, and public projects to provide public services or stimulate the economy.

Income Quintile

A statistical measure dividing the population into five equal groups according to income levels.

Excise Tax

A charge imposed on certain products, services, or transactions, commonly integrated into the cost of the item.

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare, essentially who bears the burden of a tax.