The Efficiency-Wage Theory of Worker Quality Suggests That If Firms

question 148

Multiple Choice

The efficiency-wage theory of worker quality suggests that if firms respond to a surplus of labor by reducing the wage, then highly qualified workers will be

• A)more likely to apply, and unemployment will increase.
• B)more likely to apply, and unemployment will decrease
• C)less likely to apply, and unemployment will Increase.
• D)less likely to apply, and unemployment will increase.

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Definitions:

Resource Cost

The total cost of all inputs used in the production of goods or services, including raw materials, labor, and capital. It reflects the expenditure needed to create and bring a product or service to the market.

Trade

The exchange of goods and services between individuals or entities, typically referring to international trade involving the movement of products across borders.

Specialization and Trade

An economic concept where individuals or entities focus on the production of specific goods or services to trade for other goods or services, enhancing efficiency and productivity.

Efficient Scale

The level of production at which a firm achieves the lowest long-run average cost, with all inputs utilized most effectively.