Why Don't Wages Fall So That Everyone with the Skills

question 97

Multiple Choice

Why don't wages fall so that everyone with the skills and desire gets a job?

• A) The government might prevent it, through minimum-wage legislation.
• B) Labor unions might prevent it, through bargaining backed by the threat to strike.
• C) Firms themselves might prevent it, by voluntarily choosing to pay higher wages than necessary.
• D) All of these are reasons why wages may not fall to equilibrium.

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Definitions:

Draining

The act or process of depleting or being depleted of resources or energy.

Inert Substance

A substance that does not undergo chemical reactions under a set of given conditions, often used as a control in experiments.

Placebo

A harmless substance or treatment that has no therapeutic effect, used as a control in testing new drugs.

Relaxant

A substance or drug that reduces tension or strain in muscles, often used to alleviate muscle spasms or to induce relaxation.