In which of the following cases we would not have any frictional unemployment?

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BlackTom AI · Accepted Answer

Question restatement: The prompt asks in which scenario we would not have any frictional unemployment. Frictional unemployment is the short-term, transitional unemployment that occurs while workers search for new jobs or waiting to be hired. Now, let's evaluate each option in light of that concept.
Option 1: If wages and price were fully flexible.
With fully flexible wages and prices, the labor market tends toward clearing: vacancies and jobs adjust promptly so that demand for labor matches supply. In such a setting, there is little or no need for long job searches, and involuntary unemployment (including frictional unemployment) is minimized or eliminated. This makes frictional unemployment unlikely in this scenario.
Option 2: If wages and prices were completely fixed.
If wages and prices cannot adjust, the labor market cannot clear automatically. Firms may have vacancies that cannot be filled at the fixed wage, or workers may be unable to switch to available jobs, which can sustain unemployment. In particular, the absence of wage flexibility can actually sustain or increase unemployment, including forms related to search, so this scenario does not eliminate frictional unemployment.
Option 3: If the real wage was below the equilibrium real wage.
When the real wage is below the equilibrium, labor demand exceeds labor supply, leading to vacancies and a potential shortage of workers. While this reduces unemployment due to insufficient demand for labor, it does not guarantee the elimination of frictional unemployment; there can still be transitions as workers move to filling openings, and some frictional search could persist in matching the right workers to the right jobs.
Option 4: If the real wage was above the equilibrium real wage.
Above-equilibrium real wages create a surplus of labor: many workers are willing to work than there are vacancies, so unemployment rises. Frictional unemployment is still possible as workers search for jobs they can obtain at or above the going wage, so this scenario does not remove frictional unemployment.
Option 5: None of the above.
Given the analysis above, this option would suggest that no single scenario would eliminate frictional unemployment, which contradicts Option 1’s logic about full wage-price flexibility potentially clearing the market. However, since the question asks which case would not have any frictional unemployment, the best-supported choice among the listed cases is that full flexibility (Option 1) tends toward clearing the market and reducing frictional unemployment. The other options describe conditions that do not eliminate frictional unemployment and, in some cases, could worsen it.

ECN 001B B01-B04 FQ 2025 Final Examination

In which of the following cases we would not have any frictional unemployment?

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