Question

Over the past century, the productivity of farmers (mplf) has risen substantially due to technological progress. According to the neoclassical theory, farmers’ real wage (wf/pf) should have:

a) Decreased
b) Increased
c) Stayed the same
d) Fluctuated

Answer 1

According to the neoclassical theory, if the productivity of farmers (mplf) has risen substantially due to technological progress, the farmers' real wage (wf/pf) should have increased.

Step-by-step explanation:

According to the neoclassical theory, if the productivity of farmers (mplf) has risen substantially due to technological progress, the farmers' real wage (wf/pf) should have increased. When productivity increases, the demand for labor also increases, leading to higher wages. On the other hand, if productivity unexpectedly decreases, the wages may initially continue to rise, but eventually, they will adjust to match the slower gains in productivity.