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Question
Microeconomics
Posted 5 months ago

Workers in Burginville are equally productive at every age. The mandatory retirement age in Burginville is 45 years old.

Which of the following is likely to happen if the mandatory retirement age is lowered to 40 ?

Choose 1 answer:
A) Wages decrease and output increases.
(B) Wages and employment decrease.
(c) The supply of labor increases.
(D) The supply of labor decreases.
(E) Wages and employment increase.
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Answer from Sia
Posted 5 months ago
Solution
a
Lowering Retirement Age: Lowering the mandatory retirement age from 45 to 40 reduces the number of years individuals can work
b
Labor Supply Impact: This reduction in working years decreases the overall supply of labor in the market
c
Wage and Employment Effects: With a decreased labor supply, wages are likely to increase due to the scarcity of workers, but overall employment will decrease as fewer workers are available
Answer
(B) Wages and employment decrease.
Key Concept
Labor Supply and Retirement Age
Explanation
Lowering the mandatory retirement age reduces the labor supply, leading to higher wages due to scarcity but lower overall employment.

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