Answer to Question #48532 in Microeconomics for Yoyo

Question

In the short-run, a decrease in the wage rate paid by the firms making up a perfectly competitive industry has no effect in the output market. Explain why the statement is True, False, or Uncertain according to economic principles.

Answer 1

Statement is true, because there is a lack of coordination in the behavior of firms and workers. And a certain length of employment contracts and contracts for the supply of raw materials and finished products does not allow changing sharply the number of output.