What Does the Equity Theory Explain

question 35

Multiple Choice

What does the equity theory explain?

• A) why there is a perceived imbalance between the wages that men earn and that women earn
• B) how employees respond when they believe they receive less (or more) than they deserve
• C) how organizations define and build their compensation systems
• D) why organizations provide direct and indirection compensation to employees

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Definitions:

Returns to Scale

The change in output resulting from a proportionate increase in all inputs; the concept explains how output changes with varying levels of input.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, typically resulting in lower per-unit costs with increased production.

Average Cost Curve

The average cost curve is a graphical representation showing how the average cost per unit of output varies with the level of output, typically U-shaped due to economies and diseconomies of scale.

Economies of Scale

Cost benefits that companies achieve because of their large scale of operations, generally resulting in a lower cost per output unit as the scale increases.