Suppose a Firm Decides to Raise Pay as a Way

question 5

Multiple Choice

Suppose a firm decides to raise pay as a way to reduce worker turnover.The resulting pay differential:

• A)is a transitional differential
• B)will reduce labor supply to the firm
• C)will normally be offset by other pay differentials,leaving the policy ineffective
• D)is an equilibrium differential

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Definitions:

Perfectly Inelastic

Describes a situation in economics where the quantity demanded or supplied does not change in response to a price change.

Perfectly Inelastic

A market condition where the quantity demanded or supplied is unresponsive to price changes, depicted graphically as a vertical line.

Supply

The total amount of a product or service available for purchase at any given price level.

Inflation Rate

The percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.