If Productivity Increases as Wages Increase and Firms Pay a Wage

question 201

Multiple Choice

If productivity increases as wages increase and firms pay a wage above the market clearing wage, then

• A) these firms will go out of business in the long run because they will not be able to compete with firms paying lower wages.
• B) these firms will face an excess demand for labor and will be able to hire the best workers in the market.
• C) these firms will have lower profit levels than their competitors.
• D) a potential benefit these firms may receive is a reduction in employee turnover.