If Productivity Increases as Wages Increase and Firms Pay a Wage

question 201

Multiple Choice

If productivity increases as wages increase and firms pay a wage above the market clearing wage, then

• A) these firms will go out of business in the long run because they will not be able to compete with firms paying lower wages.
• B) these firms will face an excess demand for labor and will be able to hire the best workers in the market.
• C) these firms will have lower profit levels than their competitors.
• D) a potential benefit these firms may receive is a reduction in employee turnover.

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Definitions:

Emotional Factors

Components or aspects of experiences and states that influence one's feelings, which play a crucial role in behavior and decision-making.

Human Nature

The inherent characteristics, including ways of thinking, feeling, and acting, that all humans tend to have.

Free Will

The concept that humans have the ability to make choices that are not predetermined by past events, genetics, or conditioning.

Rationality

The quality of being based on or in accordance with reason or logic.