What Does the Theory of Efficiency Wages Explain

question 46

Multiple Choice

What does the theory of efficiency wages explain?

• A) why setting wages at the equilibrium level may increase unemployment
• B) why it may be in the best interest of firms to offer wages that are above the equilibrium level
• C) why the most efficient way to pay workers is to pay them according to their skills
• D) why it is efficient for firms to set wages at the equilibrium level

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Definitions:

Theory X

A management theory that assumes employees are inherently lazy and will avoid work if they can, suggesting the need for strict oversight and control.

Theory Y

A management concept that assumes employees are inherently motivated and enjoy their work duties, suggesting that the role of management is to develop the potential of employees and help them to achieve self-fulfillment.

Management Technique

A method or approach used by managers to improve efficiency, solve problems, and achieve organizational goals.

Contingency

Contingency refers to a future event or circumstance that is possible but cannot be predicted with certainty, often implying the need for plans to address potential changes.