How Does the Theory of Efficiency Wages Explain Above-Equilibrium Wages

question 188

Multiple Choice

How does the theory of efficiency wages explain above-equilibrium wages?

• A)Employers are forced by competition to pay higher wages in efficient markets.
• B)Employers give their workers a higher wage in the hope that it will lead to increased productivity.
• C)Workers get higher wages when they prove they are increasing their productivity.
• D)Workers demand higher wages to compensate for poor fringe benefits.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operational income, highlighting the impact of fixed costs on profits.

Variable Costs

Variable Costs are expenses that vary directly with the level of production or business activity.

Sensitivity Analysis

A technique used to determine how different values of an independent variable affect a particular dependent variable under a given set of assumptions.

Break-even Point

The financial point at which total costs equal total revenue, meaning that the business is neither making a profit nor a loss.