Suppose the Market for Autoworkers Is Initially in Equilibrium, but Then

question 89

Multiple Choice

Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers?

• A) The equilibrium wage rate will increase and the equilibrium quantity of labor will decrease.
• B) The equilibrium wage rate and the equilibrium quantity of labor will both increase.
• C) The equilibrium wage rate and the equilibrium quantity of labor will both decrease.
• D) The equilibrium wage rate will decrease and the equilibrium quantity of labor will increase.

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Definitions:

Political Events

Occurrences within the political sphere that can influence economic conditions, public sentiment, and governmental policy.

Capital Goods

Physical assets that a company uses in the process of manufacturing products and services that are sold to consumers.

Exchange Rate

The conversion value of one currency into another.

Foreign Currency Exchange

The trading of different national currencies on the forex market, allowing for global trade and investment by converting from one currency to another.