Colleges and universities often do not pay salaries that are ...

[jparksx]

Colleges and universities often do not pay salaries that are market-driven. For example, it is typical for a history professor to make the same as an economics professor. What kinds of problems are likely to result from this kind of a pay scale?
 
  What will be an ideal response?

Question 2

Growth in potential GDP in the United States is estimated to be about
 
  A) 8.25 per year. B) 5.0 per year. C) 3.2 per year. D) 1.5 per year.

[jharrington11]

Answer to Question 1

If the salary for the history professor is above the market-clearing level that he or she is likely to earn working anywhere else than that is going to result in an excess of applicants vis--vis the number of available positions (i.e. an excess supply of labor). In addition, if the salary paid to economists is lower than the going rate that economists could earn in the private sector then that will lead to a shortage of economics professors (i.e. and excess demand for labor).

Answer to Question 2

C