An Efficiency Wage Is

question 218

Multiple Choice

An efficiency wage is:

• A) above the equilibrium wage and is paid to provide workers with an incentive increase productivity.
• B) efficient because it is exactly equal to the wage rate implied by the marginal productivity theory.
• C) determined by collective bargaining between unions and management.
• D) equal to the value of the marginal product of labor adjusted so as to make the structure of compensation more equitable.

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Definitions:

Deadweight Loss

Deadweight loss refers to the loss of economic efficiency when the equilibrium outcome is not achievable or is not achieved in the market.

Tax

A compulsory monetary fee or a different kind of charge levied on a taxpayer by a government entity to finance government expenses and various public costs.

Buyers

Individuals or entities that purchase goods or services for consumption, use, or investment.

Total Surplus

The combined benefit that all participants (consumers and producers) receive in a market, represented by the sum of consumer and producer surplus.