Which of the following does the Theory of Efficiency Wages explain? a. why setting wages at the...
Question:
Which of the following does the Theory of Efficiency Wages explain?
a. why setting wages at the equilibrium level may increase Unemployment.
b. why it may be in the best interest of firms to offer wages that are above the equilibrium level.
c. why the most efficient way to pay workers is to pay them according to their skills.
d. why it is efficient for firms to set wages at the equilibrium level.
Labor Economics:
The subfield of labor economics focuses on examining the relationships present in the labor market, where employers and employees bargain for employment and wages.
Key Vocabulary and Terms:
- Unemployment: A situation where the number of workers exceeds the number of open jobs. It is often expressed as a percentage of the labor force in an economy.
- Human Capital: The skills, abilities, education, and training obtained by a segment of the labor force and labor supply in an economy. Higher skilled jobs require more human capital.
- Unskilled Labor Market: A market where workers lack specialized skills and can be replaced by another worker without the firm losing marginal productivity.
Answer and Explanation: 1
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a. why setting wages at the equilibrium level may increase Unemployment.
b. why...
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Efficiency Wage Theory & Impact on Labor Market
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Chapter 6 / Lesson 9
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Employee loyalty and productivity can be increased by using the efficiency wage theory. Explore this theory, learn how it impacts the labor market, and discover why companies use it.
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