Question

13. According to the theory of efficiency wages

(x)anything that makes the efficiency wage rise relative to the market-clearing wage will increase the quantity demanded of labor and reduce the quantity supplied of labor

.(y)firms may choose to pay a wage above the equilibrium level to attract the best skilled workers, to provide an incentive to work hard and to reduce worker turnover.

(z)anything that makes the efficiency wage rise relative to the market-clearing wage will cause a surplus of labor at the efficiency wage and increase the amount of structural unemployment.

A.(x), (y) and (z)B. (x) and (y) only C.(x) and (z) onlyD.(y) and (z) onlyE.(x) only

14.The efficiency-wage theory of worker turnover suggests that firms with higher turnover will have _______ production costs and ________ profits.

A.unchanged; higher

B.higher; higher

C.lower; higher

D.lower; lower

E.higher; lower

.Which of the following statements is (are) correct?

(x)Thelma, the CEO of a corporation operating in a relatively poor country where wages are low, decides to raise the wages of her workers even though she faces an excess supply of labor. Her decision might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive.

(y)Efficiency wages to address worker health, worker turnover, worker effort, and worker quality contribute to the natural rate of unemployment.

(z)Efficiency wages, minimum-wage laws, and unions all keep wages above the equilibrium level, causing a surplus of labor.

A.(x), (y) and (z)

B. (x) and (y) only

C.(x) and (z) only

D.(y) and (z) only

E.(x) only

Answer 1

13. Option D

According to efficiency wages, in order to attract more skilled labors, the wage would be set above equilibrium which increase the quantity supplied and reduces the quantity demanded

14. Option E

As high turnover increases costs, which reduces the profit

15. Option A

Efficiency wages increases the wages above equilibrium which increases labor productivity, increases supply of labor and also increases structural unemployment which is part of natural rate of unemployment (frictional and structural)