What is the rationale for efficiency wages? How do efficiency wages help address the principal–agent problem?
What will be an ideal response?
The rationale for efficiency wages is that paying workers an above-equilibrium wage will encourage them to provide more work effort. Although the efficiency wage will cost a firm more in terms of wage costs, it could end up helping the firm’s profitability if productivity increases, thus reducing unit labor costs. An efficiency wage also helps the firm attract higher-quality workers, increases worker morale, and reduces worker turnover. In addition, having more motivated and committed workers means that the firm has to spend less time supervising or monitoring workers, thus helping a firm address the principal–agent problem.
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The Solow model demonstrates that
A) in the absence of productivity growth, economic growth will turn negative in the long run. B) in the absence of productivity growth, economic growth will reach a steady state of zero per-capita growth in the long run. C) productivity growth must exceed the rate of growth in the population to avoid a steady state in the long run. D) productivity growth will inevitably decline due to diminishing marginal productivity.
Mathematically, the value of the tax multiplier in terms of the marginal propensity to consume (MPC) is given by the formula:
A. MPC ? 1. B. (MPC ? 1) / MPC. C. 1 / MPC. D. 1 ? [1 / (1 ? MPC)].
In short-run equilibrium for a competitive firm:
A. price will not equal marginal revenue. B. marginal revenue will be greater than marginal cost. C. price will equal marginal cost. D. price will be greater than marginal cost.
To assist pineapple growers in Hawaii, the U.S. government decides to limit the number of pineapples allowed into the country that are grown in Central American countries. Such a restriction is called a(n)
A) import. B) export. C) quota. D) tariff.