Suppose an economy has the following production function: Y = AK L where A = 10, K 50, and L= 100. %3D %3D The current nominal wage is $20 and the price level of output is $4. Based on the theory of distribution, firms should O hire new workers to increase profits. O fire some current workers to reduce losses. O keep the number of workers at the current level. O the firms labor decision cannot be determined.

Suppose an economy has the following production function: Y = AK L where A = 10, K 50, and L= 100. %3D %3D The current nominal wage is $20 and the price level of output is $4. Based on the theory of distribution, firms should O hire new workers to increase profits. O fire some current workers to reduce losses. O keep the number of workers at the current level. O the firms labor decision cannot be determined.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter21: Unemployment

Section: Chapter Questions

Problem 35CTQ: While unemployment is highly negatively correlated with the level of economic activity, in the real...

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