When the Owner of a Firm Sells "Recession Insurance" to Her

question 59

Multiple Choice

When the owner of a firm sells "recession insurance" to her employees, it means that the:

• A) employees sacrifice larger bonuses during good economic times in return for higher salaries during bad economic times.
• B) owner of the firm earns higher profits during bad economic times by skimming off the workers' salaries.
• C) employees are not allowed to quit the firm for higher pay during good economic times.
• D) employees are not allowed to quit the firm during bad economic times.

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Definitions:

Input Hired

Resources or factors of production, such as labor, raw materials, and capital, employed in the creation of goods and services.

Complements in Production

Goods that are produced together in the production process; an increase in the production of one leads to an increase in the production of the other.

Wage

The fixed regular payment, typically calculated on an hourly, daily, or piecework basis, made by an employer to an employee for their labor.

Marginal Revenue Product Curve

A curve showing the additional revenue a firm earns by employing one additional unit of input, holding other factors constant.