In a competitive labor market,Firm X pays a higher wage than other firms.The only reason it pays a higher wage is to attract a larger labor pool and get the better workers.Which of the following would we expect to observe about Firm X (as compared to the other firms in the industry)?

Question

Quizplus · Accepted Answer

Since Firm X pays a higher wage only to attract better workers, it can be assumed that it would have a more productive workforce. This would lead to higher profits, even if the firm is paying a higher wage. Hence, we would expect Firm X to make about the same rate of profit as other firms.

B) The higher wage offered by Firm X would act as an incentive for workers to stay longer, so we would not expect a higher quit rate.
C) There is no information to suggest that Firm X would set up its retirement package to encourage early retirement.
D) The statement mentions that the higher wage is only to attract a larger labor pool, so it would not be expected that the wage would continually rise with seniority.

In a Competitive Labor Market,Firm X Pays a Higher Wage