-Refer to the production possibility graph above. Assume that the economy is in equilibrium at point e. If there is an increase in the wage rate, the new equilibrium is most likely to be
A) point e.
B) point d.
C) point b.
D) point h.
E) point f.

Question

-Refer to the production possibility graph above. Assume that the economy is in equilibrium at point e. If there is an increase in the wage rate, the new equilibrium is most likely to be
A) point e. 
B) point d. 
C) point b. 
D) point h. 
E) point f.

Quizplus · Accepted Answer

An increase in the wage rate typically leads to higher production costs, which can reduce the quantity of goods produced. However, if the economy is initially in equilibrium at point e, it may remain there unless other factors change, as wage increases alone do not necessarily shift the production possibility frontier.

-Refer to the Production Possibility Graph Above