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When labor productivity increases over time, generally A) it is due to increases in the number of workers b) so do average wages C) it results in higher prices for goods and services .
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Nov 27, 2021
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When labor productivity increases over time, generally A) it is due to increases in the number of workers b) so do average wages C) it results in higher prices for goods and services .
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Nick Lockwood
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Answer:
b) so do average wages
Step-by-step explanation:
In
perfect competition's equilibrium, productive factors are paid according to their marginal productivity
. This means that productive factors' payments will be directly explained by their productivity.
This
comes
from the fact that a
firm maximizes profits
, subject to its budget constraint, in an optimal way.
Equilibrium solution
will result in the following condition:
, where
is the marginal productivity of labour and
is the marginal product of capital,
is the price of labour (or wages) and
is the price of capital.
Then, because the price of labour is proportional to its productivity, if labour productivity rises, the price of labour will increase.
Zagorodniy Olexiy
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Dec 4, 2021
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Zagorodniy Olexiy
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