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P. 1
Economics Q4 2

Economics Q4 2

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Published by Nur Hidayah Mohamad

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Published by: Nur Hidayah Mohamad on Oct 22, 2012
Copyright:Attribution Non-commercial

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10/22/2012

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T
HE
 
LEVEL
 
OF
 
WAGE
 
RATES
 
IS
 
NOT
 
SATISFACTORILY
 
EXPLAINED
 
BY
 
ECONOMIC
 
THEORY
 
BECAUSE
 
THAT
 
THEORY
 
CONCENTRATES
 
ON
 
PERFECT
 
COMPETITION
 
WHILE
 
MOST
 
LABOR
 
MARKETS
 
ARE
 
IMPERFECT
. D
ISCUSS
 
WHETHER
 
THIS
 
CLAIM
 
IS
 
TRUE
.
 
Define
Wage rate
 –
pay rate based on per unit of production.
Perfect competition - a theoretical market structure.It is primarily used as a benchmark against whichother market structures are compared.
 
Marginal Revenue Product-Extra revenue obtained from extra output producedby additional factor/worker employed.
Theory of wagesWorkers will be hired up to the point where MRPequals to wage rate by a maximising firm because itis not efficient for a firm to pay worker more thanrevenue that will be gained from their labor.

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