Based on our understanding of the labour market model, we know that an increase in the markup will cause:

Question

Quizplus · Accepted Answer

An increase in the markup indicates that firms are able to charge more for their goods and services, which means they have more revenue to spend on wages. However, this does not necessarily mean that they will increase wages for all workers. In fact, it may lead to greater profit for the firm and a decrease in the quantity of labour demanded at the previous wage rate. This results in a decrease in the equilibrium real wage, as fewer workers are employed and competing for jobs. It does not impact the natural rate of unemployment, which is determined by non-economic factors such as demographics and technology. Therefore, the correct answer is C.

Based on Our Understanding of the Labour Market Model, We