Suppose That Efficiency Wages Become More Common in the Economy

question 197

Multiple Choice

Suppose that efficiency wages become more common in the economy.Economists would predict that this would

• A) increase the quantity demanded and decrease the quantity supplied of labor,thereby decreasing the natural rate of unemployment.
• B) decrease the quantity demanded and increase the quantity supplied of labor,thereby increasing the natural rate of unemployment.
• C) increase the quantity demanded and decrease the quantity supplied of labor,thereby increasing the natural rate of unemployment.
• D) decrease the quantity demanded and increase the quantity supplied of labor,thereby decreasing the natural rate of unemployment.

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash and goods, used by a business to produce goods and services and create wealth.

Labor

The use of human labor, be it physical or intellectual, in generating goods and services.

MRTS

Marginal Rate of Technical Substitution. It's the rate at which one input can be reduced for every increase in another input, keeping output constant.

Labor

The application of human physical and mental efforts in the creation and offering of goods and services.