The Theory of Efficiency Wages Explains Why

question 109

Multiple Choice

The theory of efficiency wages explains why

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

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Definitions:

Liberty Party

Abolitionist political party that nominated James G. Birney for president in 1840 and 1844; merged with the Free Soil Party in 1848.

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A collective effort by a group of people to advance their shared political, social, or ideological objectives.

Morality

Principles concerning the distinction between right and wrong or good and bad behavior.

Economics

The social science that studies how individuals, governments, firms, and nations make choices on allocating scarce resources to satisfy their unlimited wants.