A standard efficiency wage model pays workers higher wages in order to increase worker efficiency. As a result, firm profits increase and there is a pool of involuntarily unemployed workers. This equilibrium comes about in part because
A. workers are unaware of the pool of unemployed workers as long as they keep their job.
B. workers will do anything to be paid a higher wage.
C. workers are less likely to shirk when there is a pool of unemployed workers who are willing to take their job.
D. the firm agrees to not replace labor with capital.
E. the firm pays workers according to a tournament.
Answer: C
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Answer the following statement true (T) or false (F)
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What will be an ideal response?
Owners of a taco shop finds that they can sell 150 tacos a day when the price of a taco is $1.20. When they price tacos at $1, they sell 170 tacos. The absolute value of the price elasticity of demand for tacos is
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A) the usefulness of its predictions in the real world. B) the extent of the profit earned by applying it. C) the realism of its assumptions. D) the model's attention to real world details.