A central concept in macroeconomics is the idea of the natural rate of unemployment.
Why does it make sense to define full employment to occur when the unemployment rate equals the natural rate of unemployment, instead of when the unemployment rate equals zero? Elaborate and explain carefully.
Question 2
Writing in the New York Times on the technology boom of the late 1990s, Michael Lewis argues, The sad truth, for investors, seems to be that most of the benefits of new technologies are passed right through to consumers free of charge.
What does Lewis means by the benefits of new technology being passed right through to consumers free of charge?
A) In the long run, price equals the lowest possible average cost of production. In this sense, consumers receive the new technology free of charge.
B) Firms in perfect competition are price takers. Since they cannot influence price, they cannot dictate who benefits from new technologies, even if the benefits of new technology are being passed right through to consumers free of charge.
C) In perfect competition, price equals marginal cost of production. In this sense, consumers receive the new technology free of charge.
D) In perfect competition, consumers place a value on the good equal to its marginal cost of production and since they are willing to pay the marginal valuation of the good, they are essentially receiving the new technology free of charge.
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