Question 1

The efficiency-wage theory of worker health is

Accepted Answer

The answer of The efficiency-wage theory of worker health is
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Question 2

Quinn,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

Accepted Answer

By raising the wages of her workers and providing them with a nutritious diet, Quinn can potentially increase their productivity and thus increase profits. This is known as the efficiency wage theory. However, B and C are not necessarily true as raising wages may not necessarily eliminate excess supply of labor and may not lead to an increase in shirking.

Question 3

The efficiency-wage theory of worker turnover suggests that firms with

Accepted Answer

The efficiency-wage theory suggests that firms that pay their workers higher wages than the market rate will have lower turnover rates because workers are motivated to keep their jobs. However, if a firm cannot afford to pay higher wages, they may still experience high turnover rates. High turnover leads to higher costs associated with recruiting and training new workers, resulting in higher production costs. As a result, profits will likely decrease. Therefore, firms with higher turnover will have higher production costs and lower profits.

Question 4

Maxine,the owner of a furniture company,decides to raise the wages of her workers even though she faces an excess supply of labor.Her decision

Accepted Answer

Raising wages can attract more skilled workers (A), potentially increasing the quality of the workforce (C), and it might also lead to a larger pool of applicants, increasing the excess supply of labor (B).

Question 5

Pollee is the CEO of a corporation that hires nonunion labor.According to the theory of efficiency wages,if she decides to pay her workers more than the competitive equilibrium wage,then

Accepted Answer

By paying more than the competitive equilibrium wage, Pollee can increase worker productivity, reduce turnover, and attract higher-quality applicants, potentially increasing the firm's profits.

Question 6

In the early 1900s,Henry Ford introduced

Accepted Answer

Henry Ford introduced a high-wage policy in his factories, paying workers double the average wage at that time. This policy produced many of the effects predicted by efficiency-wage theory, such as reducing worker turnover and absenteeism, improving worker morale and productivity, and attracting a larger pool of job applicants. Thus, the best choice is A) a high-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory.

Question 7

The efficiency-wage theory of worker quality suggests that if firms respond to a surplus of labor by reducing the wage,then

Accepted Answer

According to the efficiency-wage theory, lowering the wage rate can signal to high-quality workers that the firm may not value their skills and contributions, leading them to seek employment elsewhere. As a result, the most competent applicants are less likely to apply for the firm's jobs, which can lower the overall quality of the workforce. Therefore, choice B is the best answer.

Question 8

Ellen decides to hire some additional workers for her vinyl siding factory.The equilibrium wage is $14 per hour.Efficiency wage theory suggests that it is reasonable for Ellen to offer

Accepted Answer

Efficiency wage theory suggests that paying above the equilibrium wage can attract more skilled and motivated workers, reduce turnover, and increase productivity by discouraging shirking.

Question 9

A firm may pay efficiency wages in an attempt to

Accepted Answer

Efficiency wages are designed to achieve multiple goals such as reducing incentives to shirk, reducing turnover, and attracting a well-qualified pool of applicants. By offering higher than market wages, firms can motivate employees to work harder and be more productive, reducing shirking and turnover. Additionally, the higher wages may make the firm more attractive to high-quality workers who are selective about where they work. Therefore, all of the options A, B, and C are correct.

Question 10

Charlie is the owner of a firm that produces bottled water in Washington state.There are many other such firms in the area.Charlie decides that if he pays his workers a wage higher than the going market wage,his profits will increase.Which of the following is a likely explanation for his decision?

Accepted Answer

By paying a higher wage than the market, Charlie can retain his workers for a longer time. This will save him costs associated with employee turnover, such as hiring and training costs. Additionally, experienced workers can increase productivity and efficiency, leading to higher profits.

Question 11

Daisy is the newly appointed CEO of a company that manufactures CD drives on an assembly line.Her staff has told her that the output the firm produces,given the number of workers employed,indicates that some workers may be shirking.According to efficiency wage theory,what should she do?

Accepted Answer

The efficiency wage theory suggests that paying workers above the equilibrium wage rate can motivate them to work harder and reduce shirking. By doing so, workers will perceive the higher wage as a reward for putting in more effort, and they will work harder to keep their jobs. This can increase productivity and ultimately benefit the company by generating more output. Therefore, Daisy should pay all workers more than the equilibrium wage rate.

Question 12

Which of the following is not a reason that paying efficiency wages may increase a firm's profit?

Accepted Answer

The reason stated in option D is not directly related to increasing a firm's profit. While a decrease in the natural rate of unemployment may lead to a higher standard of living in the economy, it does not necessarily translate into increased profits for a particular firm. The other options (A, B, and C) all directly relate to how paying efficiency wages can increase a firm's profit by improving worker productivity and reducing costs.

Question 13

Four employers have justified their actions as follows.Whose logic is not consistent with the logic of efficiency wage theory?

Accepted Answer

The logic of efficiency wage theory is that paying workers more than the market equilibrium wage can lead to increased productivity due to better morale and reduced turnover costs. Kay's decision to pay workers less than the equilibrium wage in order to prevent them from seeking other employment goes against this logic.

Quiz 28: Unemployment