Relationship Between Markets

You live in an economy with no government or foreign trade. There are only households who sell their labour and buy goods and businesses that buy labour and sell goods.

1. You own a company that makes goods. The current wage in your society is $5 a worker, to compete against the other companies you....

a. Raise wages to $7

b. Lower wages to $3

2. You had $50 dollars to hire workers. When wages were $5, you could afford to hire how many workers? ________________________

3. Now that you have raised wages, you can afford to hire how many workers?

a. More workers

b. Less workers

4. What will this do to the amount of units your company can produce?

a. More units produced

b. Less units produced

5. If your company is producing less goods, what will this do to the amount of money the company makes selling these goods at $3 a unit?

a. The company will make more money

b. The company will make less money

6. What will you have to do to the price to keep the company running?

a. Sell at a higher price

b. Sell at a lower price

7. Assuming your competitors do not change their price, keep it at $5, how will this impact the quantity sold?

a. Sell less goods

b. Sell more goods

8. What happens to the amount of money the company makes if they sell less goods?

a. Company makes more

b. Company makes less

9.What will the company have to do when hiring in the future?

a. Hire the same number of workers at the same wage ($7)

b. Hire more workers at a lower wage ($5)

c. Hire less workers at a higher wage ($10)

10. What happens to the quantity of goods produced and sold?

a. More goods are produced and the surplus drives down price

b. Less goods are produced and the shortage drives up price