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If Firms Seek an Average Markup of 25% Over Labor

Question 6

Multiple Choice

If firms seek an average markup of 25% over labor costs,and this is consistent with labor demands at the natural rate,then in the long run


A) real wages will be 25% of the price level
B) prices will be 4 times greater than wages
C) wages will rise 80 cents for every $1 increase in prices
D) wages will fall 25 cents for every $1 increase in prices
E) prices will rise 25 cents for every $1 increase in wages

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