Which of the Following Does the Theory of Efficiency Wages

question 136

Multiple Choice

Which of the following does the theory of efficiency wages explain?

• A)why setting wages at the equilibrium level may increase unemployment
• B)why it may be in the best interest of firms to offer wages that are above the equilibrium level
• C)why the most efficient way to pay workers is to pay them according to their skills
• D)why it is efficient for firms to set wages at the equilibrium level

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Definitions:

Depreciation Expense

An accounting method used to allocate the cost of a tangible asset over its useful life.

Operating Expenses

Costs associated with running a business's day-to-day activities, excluding the cost of goods sold, such as rent, utilities, and payroll.

Liquidity Ratio

A financial metric used to determine a company's ability to pay off its short-term liabilities with its most liquid assets.

Inventory Turnover

This is a ratio showing how many times a company's inventory is sold and replaced over a period, usually a year, indicating the efficiency of inventory management.