Question

1.)Which of the following examples best illustrates how implicit contracts cause wages to be sticky?

Select the correct answer below:

A.)Workers at New Juice company know that their wages will not be decreased during weak economy, but also do not expect wages to increase when the economy is strong.

B.)ABC company cannot reduce wages due to union contracts.

C.)Old Car company cannot lower wages below the minimum wage.

D.)Party rentals has no problems raising wages during good economic times, but would rather lay off workers than lower wages when demand falls.

2.)

Which of the following scenarios represents sticky wages?

Select all that apply:

• a company cannot reduce wages below minimum wage

• employers share the profits with workers by giving an annual bonus

• when wages are low, demand for more labor increases

• employees work under an implicit contract, that the employer will try to keep wages from falling when the economy is weak

Answer 1