A Firm May Benefit by Paying Workers More Than the Market

question 28

Multiple Choice

A firm may benefit by paying workers more than the market clearing wage because the higher wages may lead to all of the following EXCEPT

• A)lower worker turnover.
• B)improved worker morale.
• C)reduced shirking of work.
• D)reduced taxes.

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Definitions:

Total Product

The total output or production achieved by a firm from a given amount of inputs.

Marginal Product

The increase in output that results from employing one more unit of a particular input, keeping all other inputs constant.

Diminishing Marginal Returns

is an economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, begins to decrease.

Variable Resource

A resource whose quantity can change in the short run to increase or decrease production levels.