If Firms Seek an Average Markup of 25% Over Labor

question 25

Multiple Choice

If firms seek an average markup of 25% over labor costs,and this is consistent with labor demands at the natural rate,then in the long run

• A) real wages will be 25% of the price level
• B) prices will be 4 times greater than wages
• C) wages will rise 80 cents for every $1 increase in prices
• D) wages will fall 25 cents for every $1 increase in prices
• E) prices will rise 25 cents for every $1 increase in wages

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Definitions:

Cash Proceeds

The total amount of cash received from the sale of goods, asset disposals, or financing transactions.

Controlling Investor

An investor or entity that holds a significant amount of voting stock in a company, allowing them to influence or control management decisions.

Long-Term Investment

Investments that a company or individual holds for more than one year, typically including stocks, bonds, or real estate.

Parent

A company that holds a controlling interest in another company, making the other company its subsidiary.