How Does the Theory of Efficiency Wages Explain Above-Equilibrium Wages

question 26

Multiple Choice

How does the theory of efficiency wages explain above-equilibrium wages?

• A)employers are forced to pay higher wages in efficient markets
• B)workers get a rise in wage when they prove they are increasing their productivity
• C)employers give their workers a higher wage in the hope that it will lead to increased productivity
• D)workers demand higher wages to compensate for poor fringe benefits

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Definitions:

Double Declining-Balance Depreciation

A method of accelerated depreciation which doubles the rate at which an asset’s book value depreciates compared to straight-line depreciation.

Annual Depreciation Expense

The portion of the cost of a fixed asset that is charged as an expense in a particular fiscal year, as a result of wear, tear, and obsolescence.

Straight-Line Depreciation

A method of calculating the depreciation of an asset by evenly spreading its cost over the expected life of the asset.

Asset Impairment Loss

A sudden write-down or devaluation of an asset to its fair market value which is lower than its currently recorded cost, reflecting unexpected decreases in value.