Scenario: the Following Excerpts Describe Some Practices of Determining Wages

question 49

Multiple Choice

Scenario: The following excerpts describe some practices of determining wages in the Soviet economy. "Centrally-fixed weightings based on an accurate comparison of the cost of living in different regions is one of the advantages of the current [1980s] method of wage regulation. In practice, however, even here we do not find what might have been expected. … government departments enjoying a high status fix higher weightings for their workers than the local average. … As a result, workers earn different rates for the same job. … All this indicates that the advantages of regulating wages centrally for the whole country are often illusory because in principle it cannot be done on the basis of overall productivity. … In the face of life's complexity, wage regulation is not feasible and actual wage trends become semi-random." (Source: Tatiana I. Zaslavskaia.1990. The Second Socialist Revolution: An Alternative Soviet Strategy. New York: I. B. Tauris.)
-Refer to the scenario above.Which of the following best describes the problem of wage determination by central planners?

• A) Wages based on the cost of living tend to become random in principle.
• B) The central planners themselves may have incentives to distort the wages.
• C) Even if the central planners correctly implement the wage regulation, productivity may fall.
• D) The cost of living and productivity conflict with each other and the wages tend to become random.

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Definitions:

Boots

Boots are a type of footwear that cover the feet and the ankles, and sometimes extend up to the knees or hips, designed for various purposes including fashion, protection, and work.

Pairs

A term that can refer to two related or matched items or elements, commonly used in various contexts.

Cost Curve

is a graphical representation of how the cost of producing varies with different levels of output, typically including curves like average cost and marginal cost.

Output

The quantity of goods or services produced by a firm or industry.