In the Classical Model, What Occurs If a Wage of $20/hour

question 91

Multiple Choice

In the classical model, what occurs if a wage of $20/hour results in unemployed workers?

• A) The workers will go on strike to demand that more jobs be created.
• B) Producers will quickly create more jobs and hire the unemployed workers, so unemployment is short-lived.
• C) The wage rate will drop, more workers will be hired, and the unemployment rate falls.
• D) The government will step in and order firms to hire more workers.

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Definitions:

Adverse Selection

A situation in which one party in a transaction has more or better information than the other, often leading to an imbalance and potentially unfavorable outcomes.

Hidden Characteristics

Traits or features of a product or service that are not immediately observable to the buyer, potentially leading to information asymmetry.

Psychology

The scientific study of the mind and behaviors, encompassing a wide range of topics from cognitive processes to social interactions.

Economic Behavior

The study of how individuals, households, and organizations make choices to allocate scarce resources.