Employee Subsidies Will Be Most Effective at Raising the Effective

question 24

Multiple Choice

Employee subsidies will be most effective at raising the effective wage of the poor when

• A) demand for labor is elastic.
• B) supply for labor is inelastic.
• C) both A and B
• D) neither A nor B

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Definitions:

Transaction Costs

The time, effort, and other resources needed to search out, negotiate, and complete an exchange.

Price Ceiling

A legally established maximum price for goods or services, intended to protect consumers from excessively high prices.

Market Equilibrium

A condition in which market supply equals market demand, and the price of the good or service stabilizes.

Quantity Demanded

The specific amount of a product that consumers are willing to buy at a given price, holding all other factors constant.