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

question 286

Multiple Choice

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

• A) the most competent applicants will likely apply for that firm's jobs.
• B) the most competent applicants will likely not apply for that firm's jobs.
• C) unemployment will increase.
• D) the quality of the firm's work force will increase.

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Definitions:

Invisible Hand

A metaphor used by Adam Smith to describe the self-regulating nature of the market, where individual self-interest promotes societal benefit.

Economic Policy

Strategies and actions taken by the government to influence its economy, affecting issues like unemployment, inflation, and economic growth.

Monetary Stability

The condition of having stable prices and low inflation in an economy, maintaining the purchasing power of the currency.

Free Trade

International trade left to its natural course without tariffs, quotas, or other restrictions.