Question

In: Economics

1. which of the following statements is correct regarding the model of the labor market a....

1. which of the following statements is correct regarding the model of the labor market

a. in the short- and medium-run models the amount of capital is fixed, while in the long run model the amount of capital can vary.
b. capital-intense technology progress raises unemployment in both the short and long run.
c. in the long run model, firms enter the market shen the markup (profits) are low.

2. The introduction of a new labour-saving technolofy results in:

a. lower wage share of output and higher income inequality in the short run
b. higher wage share of output and higher income inequality in the short run.
c. lower wage share of output and lower income inequality in the short run.

Solutions

Expert Solution

1. Option a

In the short and medium run models the amount of capital is fixed, while in the long run model the amount of capital can vary.

In the short run one factor of production is fixed, e.g. capital. This means that if a firm wants to increase output, it could employ more workers, but not increase capital in the short run as it takes time to expand.In long run all factors become variable.The long-run is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs, whereas, in the short run, firms are only able to influence prices through adjustments made to production levels.

2. Option a

Lower wage share of output and higher income inequality in the short run.

Labor saving technology will result in replacement of manual work by machines, thus resulting in loss of jobs and wages for some workers, thus resulting in loss of income and increasing inequality of income.

Rahul Sunny answered 2 years ago
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