Suppose that the new trade deal between the UK and the EU is less favourable to conducting business and exporting abroad than being part of the single market. As a result, the degree of competition between firms in the UK falls. (a) What is the effect of this trade deal on the number of firms in the long run and the equilibrium markup? b) Using the WS-PS diagram, illustrate the effect on real wages and equilibrium unem- ployment in the long run.

Suppose that the new trade deal between the UK and the EU is less favourable to conducting business and exporting abroad than being part of the single market. As a result, the degree of competition between firms in the UK falls. (a) What is the effect of this trade deal on the number of firms in the long run and the equilibrium markup? b) Using the WS-PS diagram, illustrate the effect on real wages and equilibrium unem- ployment in the long run.

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 41CTQ: Unemployment rates have been higher in many European countries in recent decades than in the United...

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