An Efficiency Wage

question 185

Multiple Choice

An efficiency wage

• A) is set above the equilibrium real wage to induce greater work effort.
• B) is set below the equilibrium real wage to reduce labor costs.
• C) increases the supply of labor and therefore increases potential GDP.
• D) increases the demand for labor and therefore increases potential GDP.
• E) reduces frictional unemployment.

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Definitions:

Equilibrium Constant

The equilibrium constant is a number that expresses the ratio of the concentrations of the products to the reactants at equilibrium, symbolized as K_eq in chemical reactions.

Products

The substances that result from a chemical reaction, situated on the right-hand side of a chemical equation.

Reactants

Substances consumed or altered in the course of a chemical reaction, transitioning from initial substances to products.

Equilibrium Constant

A value that expresses the ratio of the concentration of the products to the concentration of the reactants at equilibrium, indicating the extent of a chemical reaction.