Answered: Using these three ideas, indicate which…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter26: Earnings, Productivity, And The Job Market

Section: Chapter Questions

Problem 12CQ

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Three main ideas help explain why the prices of some services, such as education, health care, and the performing arts, continue to rise relative to those of other goods or services.

1. real wages in different occupations can rise at varying rates in the long run,

2. Real wages tend to rise at the same rate as labor productivity.

3. Productivity cannot or does not grow for certain services.

Using these three ideas, indicate which of the following statements about high school teachers and factory workers is true in accordance with the cost disease of the personal services? Select all that apply.

A. Wages of high school teachers will rise at a faster rate than the rate of productivity growth.

B. Because high school teachers are no more productive than they used to be but factory workers are, the real wage of factory workers must grow faster than that of high school teachers.

C. The services of high school teachers will become relatively more expensive than those of factory workers.

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