Question: QUESTION 4 Question 4 (a) Suppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries? What does standard economic theory

QUESTION 4 Question 4 (a) Suppose that there is an excess

QUESTION 4

supply of economics professors. Should universities necessarily reduce salaries? What does standard

Question 4 (a) Suppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries? What does standard economic theory suggest? What does efciency-wage theory suggest? (b) Suppose we have the information about the labour market. Labour demand equation: Nd = 175 225 (W) Labour supply equation: NS = 50 + 50(W). Nd indicates the quantity of labour demanded, NS indicates the quantity of labour supplied, W is the wage rate. Compute the equilibrium wage rate and quantity in the labour market

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