Firms and Individuals Do Not Technically Buy and Sell the Labor

question 92

Multiple Choice

Firms and individuals do not technically buy and sell the labor input;renting is a more accurate description.Therefore,

• A)the supply and demand model does not apply.
• B)the basic model of supply and demand can be applied to competitive labor markets.
• C)equilibrium will never occur.
• D)firms will always underpay workers.

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Definitions:

Societal Choices

Decisions made by a society as a whole about the allocation of resources and priorities among different uses.

Opportunity Cost

The worth of the best alternative given up as a consequence of a decision made.

Utility

The subjective benefit or satisfaction a person expects from a choice or course of action.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources, leading to the necessity of making choices.