Assume That a Country Experiences a Reduction in Productivity That

question 86

Multiple Choice

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the real wage were rigid, this would lead to:

• A) no change in the real wage and a rise in unemployment.
• B) no change in the real wage and no change in unemployment.
• C) no change in the real wage and a fall in unemployment.
• D) a decrease in the real wage.

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Definitions:

Average Fixed Cost

Permanent production expenses, which don't fluctuate with output changes, divided by the output number.

Marginal Cost

The increase in cost that arises from an additional unit of production.

Average Variable Cost

The per unit cost of variable inputs (like labor and raw materials) that change with the level of output.

Marginal Cost

The additional cost incurred by producing one more unit of a product or service, which typically varies with the level of production.