Question

(part1) What happens to the real wage in terms of food if the nominal wage increases and the price of food is constant?

a. increases

b.decreases

c.remains the same

d. we cannot know what happens

(part 2) Imagine that Lc increases when trade opens. As a result, what happens to MPLc and what does that mean for the real wage in terms of Qc?

a.MPLc increases, so the real wage in terms of Qc increases

b.MPLc increases, so the real wage in terms of Qc decreases

c.MPLc decreases, so the real wage in terms of Qc increases

d.MPLc decreases, so the real wage in terms of Qc decreases

Answer 1

Part 1)

As nominal wage increases and the price of foods is constant then the real wage will also increase.

Therefore, the correct answer is option (A) Increases.

Part 2)

As Lc increases when the trade opens then MPLc increases, so the real wage in terms of Qc increases. because of access to better technology or specialization in trade.

Therefore, the correct answer is option (A) MPLc increases, so the real wage in terms of Qc increases

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