The Theory of "Efficiency Wages" Provides

question 8

Multiple Choice

The theory of "efficiency wages" provides

• A)a way in which firms can pay workers less than the market-clearing wage.
• B)an explanation for the high wages that unions are able to extract from firms.
• C)many firms with a good reason to dismiss workers.
• D)most workers with a good reason to quit.
• E)one explanation for why wages do not readily fall in response to excess supply in labour markets.

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Definitions:

Purely Competitive Market

A market structure characterized by a large number of buyers and sellers, homogeneous products, and free entry and exit, leading to price taking behavior.

Purely Competitive Firm

A company operating in a market where there are many buyers and sellers offering homogeneous products, leading to the inability to influence market price.

Total Revenue

The total income received by a firm from the sale of its goods or services.

Marginal Revenue

Marginal revenue is the additional income generated from selling one more unit of a good or service.