Amalgamated Industries Manufactures Parts for Furniture

question 25

Multiple Choice

Amalgamated Industries manufactures parts for furniture. Management has decided to change the method of payment to a skill-based plan. You are interested in increasing your current compensation and see this as an opportunity.
-Which of the following may be a disadvantage of introducing this type of pay plan?

• A) Employees will become less motivated.
• B) Employees will become more specialized.
• C) Employees will tend not to work as hard as before.
• D) Your employer may pay for skills that they aren't using.
• E) Your employer will have less control over what each employee does.

---

Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, typically measured above the supply curve.

Well-Defined Property Rights

Legal parameters that establish ownership and delineate the use of resources or assets.

Mutually Beneficial Trades

Transactions between parties that improve the welfare of each participant.

Market Failures

Situations where the allocation of goods and services by a free market is not efficient, often leading to a loss of economic value.