What is an efficiency wage and what effect does it have in the labor market?
What will be an ideal response?
An efficiency wage rate is a wage that is set by a firm above the equilibrium wage rate in order to motivate the firm's workers to work hard. The idea is that workers will work hard in order to keep their jobs because they know that if they are fired the (equilibrium) wage rate they are likely to get at a new job will be less than the efficiency wage. An efficiency wage is one of the factors that push the wage rate above its equilibrium and thereby create unemployment.
You might also like to view...
Why has the cartel in diary farming not been broken up?
a. Organized crime is used to enforce a dairy compact. b. The dairy industry is exempt from anti-trust laws. c. Consumers do not mind paying higher prices for milk. d. Economic studies indicate that to do so would decrease efficiency.
If weak aggregate demand is pushing the economy into recession, which of the following must be true?
A) The economy is at an equilibrium that is on the long-run Phillips curve. B) The economy is at an equilibrium that is not on the long-run Phillips curve. C) Contractionary monetary policies will push the economy back to the long-run Phillips curve. D) The economy is at an equilibrium that is on the long-run aggregate supply curve.
Look at the production schedule below:
Workers 0 1 2 3 4 5 Output 0 45 80 100 130 165 Which property of a standard production function does it violate? A) constant returns to scale B) decreasing marginal product of capital C) decreasing marginal product of labor D) production increasing in labor
During a period when output and employment are falling, the government will try to
What will be an ideal response?