If All Firms Pay an Efficiency Wage,then

question 96

Multiple Choice

If all firms pay an efficiency wage,then

• A) there is no cost to shirking because the shirking worker can receive his high wage at another firm after being caught and fired.
• B) the macroeconomy would enjoy a prolonged period of near-zero unemployment.
• C) there is a cost to shirking because the efficiency wage is less than it would have been if only a few firms paid it.
• D) there is a cost to shirking because the shirking worker will spend a greater time unemployed after being caught and fired.

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Definitions:

Marginal Propensity

The portion of additional income that an individual is likely to spend on goods and services instead of saving.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, which can affect purchasing power and inflation.

Aggregate Expenditure Line

A graphical representation of the total spending in an economy, including consumption, investment, government, and net exports, at various levels of income.

Marginal Propensity

The proportion of an additional increment of income that is spent on consumption. It reflects the change in consumption resulting from a change in income.