Question 1

Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level?

Accepted Answer

A) minimum-wage laws 
B) unions 
C) efficiency wages 
D) All of the above are correct. 
A) minimum-wage laws 
B) unions 
C) efficiency wages 
D) All of the above are correct.

Question 2

The theory of efficiency wages provides a possible explanation as to why

Accepted Answer

A) workers form unions. 
B) firms should try to reduce surpluses of labor. 
C) firms may be inclined to keep their workers' wages above the equilibrium level. 
D) firms may be inclined to keep their workers' wages below the equilibrium level. 
A) workers form unions. 
B) firms should try to reduce surpluses of labor. 
C) firms may be inclined to keep their workers' wages above the equilibrium level. 
D) firms may be inclined to keep their workers' wages below the equilibrium level.

Question 3

Which of the following is not a reason economies experience structural unemployment?

Accepted Answer

A) job search 
B) unions 
C) minimum-wage laws 
D) efficiency wages 
A) job search 
B) unions 
C) minimum-wage laws 
D) efficiency wages

Question 4

Minimum-wage laws,unions,and efficiency wages contribute to

Accepted Answer

A) both structural unemployment and the natural rate of unemployment. 
B) neither structural unemployment nor the natural rate of unemployment. 
C) structural unemployment,but not the natural rate of unemployment. 
D) the natural rate of unemployment,but not structural unemployment. 
A) both structural unemployment and the natural rate of unemployment. 
B) neither structural unemployment nor the natural rate of unemployment. 
C) structural unemployment,but not the natural rate of unemployment. 
D) the natural rate of unemployment,but not structural unemployment.

Question 5

Which of the following is an example of an efficiency wage?

Accepted Answer

A) an addition the government makes to some workers' wages in order to reduce poverty 
B) an equilibrium wage paid to workers who work part time and so are exempt from the minimum wage 
C) paying higher wages to workers doing dangerous tasks 
D) an above equilibrium wage paid to workers to reduce shirking 
A) an addition the government makes to some workers' wages in order to reduce poverty 
B) an equilibrium wage paid to workers who work part time and so are exempt from the minimum wage 
C) paying higher wages to workers doing dangerous tasks 
D) an above equilibrium wage paid to workers to reduce shirking

Question 6

The efficiency-wage theory of worker turnover suggests that firms with higher turnover will have

Accepted Answer

A) higher production costs and higher profits. 
B) higher production costs and lower profits. 
C) lower production costs and higher profits. 
D) lower production costs and lower profits. 
A) higher production costs and higher profits. 
B) higher production costs and lower profits. 
C) lower production costs and higher profits. 
D) lower production costs and lower profits.

Question 7

Minimum-wage laws

Accepted Answer

A) create frictional unemployment,while firms paying wages above equilibrium to reduce worker turnover creates structural unemployment. 
B) create structural unemployment,while firms paying wages above equilibrium to reduce worker turnover creates frictional unemployment. 
C) and firms paying wages above equilibrium to reduce worker turnover both create structural unemployment. 
D) and firms paying wages above equilibrium to reduce worker turnover both create frictional unemployment. 
A) create frictional unemployment,while firms paying wages above equilibrium to reduce worker turnover creates structural unemployment. 
B) create structural unemployment,while firms paying wages above equilibrium to reduce worker turnover creates frictional unemployment. 
C) and firms paying wages above equilibrium to reduce worker turnover both create structural unemployment. 
D) and firms paying wages above equilibrium to reduce worker turnover both create frictional unemployment.

Question 8

Efficiency-wage theory suggests that paying

Accepted Answer

A) low wages might be profitable because they raise the efficiency of a firm's workers. 
B) low wages might be profitable because they lower the efficiency of a firm's workers. 
C) high wages might be profitable because they raise the efficiency of a firm's workers. 
D) high wages might be profitable because they lower the efficiency of a firm's workers. 
A) low wages might be profitable because they raise the efficiency of a firm's workers. 
B) low wages might be profitable because they lower the efficiency of a firm's workers. 
C) high wages might be profitable because they raise the efficiency of a firm's workers. 
D) high wages might be profitable because they lower the efficiency of a firm's workers.

Question 9

The efficiency-wage theory of worker health is

Accepted Answer

A) more relevant for explaining unemployment in less developed countries than in rich countries. 
B) more relevant for explaining unemployment in rich countries than in less developed countries. 
C) equally relevant for explaining unemployment in less developed countries and in rich countries. 
D) not relevant for explaining unemployment. 
A) more relevant for explaining unemployment in less developed countries than in rich countries. 
B) more relevant for explaining unemployment in rich countries than in less developed countries. 
C) equally relevant for explaining unemployment in less developed countries and in rich countries. 
D) not relevant for explaining unemployment.

Question 10

Three employers have justified their actions as follows.Whose logic is not consistent with the logic of efficiency wage theory?

Accepted Answer

A) Instead of spending money on an electronic timing system that monitors worker hours,Tom spends an equivalent amount of money on higher wages. 
B) Dick pays his workers less than the equilibrium wage so that they will not have the time or money to look for work somewhere else. 
C) Harry pays his workers in a developing country more than the going wage hoping that they will get a better diet and so be more productive. 
D) None of the above is consistent with the logic of efficiency wage theory. 
A) Instead of spending money on an electronic timing system that monitors worker hours,Tom spends an equivalent amount of money on higher wages. 
B) Dick pays his workers less than the equilibrium wage so that they will not have the time or money to look for work somewhere else. 
C) Harry pays his workers in a developing country more than the going wage hoping that they will get a better diet and so be more productive. 
D) None of the above is consistent with the logic of efficiency wage theory.

Question 11

Michael decides to hire some additional workers for his roofing company.The equilibrium wage is $17 per hour.Efficiency wage theory suggests that it is reasonable for Michael to offer

Accepted Answer

A) $17 per hour. 
B) less than $17 per hour because some people would be willing to work for less. 
C) less than $17 an hour to prevent shirking. 
D) more than $17 per hour in order to attract a better pool of applicants. 
A) $17 per hour. 
B) less than $17 per hour because some people would be willing to work for less. 
C) less than $17 an hour to prevent shirking. 
D) more than $17 per hour in order to attract a better pool of applicants.

Question 12

Which of the following causes of unemployment is not associated with a wage rate above the market equilibrium level?

Accepted Answer

A) efficiency wages 
B) job search 
C) minimum-wage laws 
D) unions 
A) efficiency wages 
B) job search 
C) minimum-wage laws 
D) unions

Question 13

Efficiency wages

Accepted Answer

A) increase frictional unemployment by keeping wages above equilibrium. 
B) decrease frictional unemployment by keeping wages at equilibrium. 
C) increase structural unemployment by keeping wages above equilibrium. 
D) decrease structural unemployment by keeping wages at equilibrium. 
A) increase frictional unemployment by keeping wages above equilibrium. 
B) decrease frictional unemployment by keeping wages at equilibrium. 
C) increase structural unemployment by keeping wages above equilibrium. 
D) decrease structural unemployment by keeping wages at equilibrium.

Question 14

Suppose that efficiency wages become more common in the economy.Imposing efficiency wages

Accepted Answer

A) increases the quantity demanded and decreases the quantity supplied of labor. 
B) decreases the quantity demanded and increases the quantity supplied of labor. 
C) increases the quantity demanded and decreases the quantity supplied of labor 
D) decreases the quantity demanded and increases the quantity supplied of labor 
A) increases the quantity demanded and decreases the quantity supplied of labor. 
B) decreases the quantity demanded and increases the quantity supplied of labor. 
C) increases the quantity demanded and decreases the quantity supplied of labor 
D) decreases the quantity demanded and increases the quantity supplied of labor

Question 15

Wages set above the equilibrium wage by

Accepted Answer

A) firms to increase morale are called collective bargaining wages. 
B) lawmakers to decrease cyclical unemployment are called minimum wages laws. 
C) firms to increase productivity are called efficiency wages. 
D) lawmakers to decrease the length of a job search are called efficiency wages. 
A) firms to increase morale are called collective bargaining wages. 
B) lawmakers to decrease cyclical unemployment are called minimum wages laws. 
C) firms to increase productivity are called efficiency wages. 
D) lawmakers to decrease the length of a job search are called efficiency wages.

Question 16

According to the theory of efficiency wages,if a firm stops paying efficiency wages it is likely to see a(n)

Accepted Answer

A) increase in the number of job applicants and an increase in how long workers stay on the job. 
B) increase in the number of job applicants and a decrease in how long workers stay on the job. 
C) decrease in the number of job applicants and an increase in how long workers stay on the job. 
D) decrease in the number of job applicants and a decrease in how long workers stay on the job. 
A) increase in the number of job applicants and an increase in how long workers stay on the job. 
B) increase in the number of job applicants and a decrease in how long workers stay on the job. 
C) decrease in the number of job applicants and an increase in how long workers stay on the job. 
D) decrease in the number of job applicants and a decrease in how long workers stay on the job.

Question 17

The theory of efficiency wages explains why

Accepted Answer

A) setting wages at the equilibrium level may increase unemployment. 
B) it may be in the best interest of firms to offer wages that are above the equilibrium level. 
C) the most efficient way to pay workers is to pay them according to their skills. 
D) it is efficient for firms to set wages at the equilibrium level. 
A) setting wages at the equilibrium level may increase unemployment. 
B) it may be in the best interest of firms to offer wages that are above the equilibrium level. 
C) the most efficient way to pay workers is to pay them according to their skills. 
D) it is efficient for firms to set wages at the equilibrium level.

Question 18

Emeril is the owner of a restaurant.He decides to raise the wages of his workers even though he faces an excess supply of labor.His decision

Accepted Answer

A) might increase profits if it attracts a better pool of workers to apply for jobs at his restaurant. 
B) will reduce the excess supply of labor. 
C) is an example of the benefits of a minimum-wage law. 
D) All of the above are correct. 
A) might increase profits if it attracts a better pool of workers to apply for jobs at his restaurant. 
B) will reduce the excess supply of labor. 
C) is an example of the benefits of a minimum-wage law. 
D) All of the above are correct.

Question 19

Efficiency wages

Accepted Answer

A) raise the productivity of a firm's workers,so the firm hires more workers. 
B) raise the productivity of a firm's workers,so the firm hires fewer workers. 
C) reduce the productivity of a firms' workers,so the firm hires more workers. 
D) reduce the productivity of a firm's workers,so the firm hires fewer workers. 
A) raise the productivity of a firm's workers,so the firm hires more workers. 
B) raise the productivity of a firm's workers,so the firm hires fewer workers. 
C) reduce the productivity of a firms' workers,so the firm hires more workers. 
D) reduce the productivity of a firm's workers,so the firm hires fewer workers.

Question 20

Susan is a plant manager in charge of a factory in a relatively poor country.Even though market wages are low,she decides to raise the wages of her workers.Her decision

Accepted Answer

A) might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive. 
B) will help eliminate the excess supply of labor. 
C) may cause her workers to reduce the effort they expend at their jobs. 
D) All of the above are correct. 
A) might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive. 
B) will help eliminate the excess supply of labor. 
C) may cause her workers to reduce the effort they expend at their jobs. 
D) All of the above are correct.

Exam 15: Unemployment: The Theory of Efficiency Wages

Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level?

The theory of efficiency wages provides a possible explanation as to why

Which of the following is not a reason economies experience structural unemployment?

Minimum-wage laws,unions,and efficiency wages contribute to

Which of the following is an example of an efficiency wage?

The efficiency-wage theory of worker turnover suggests that firms with higher turnover will have

Minimum-wage laws

Efficiency-wage theory suggests that paying

The efficiency-wage theory of worker health is

Three employers have justified their actions as follows.Whose logic is not consistent with the logic of efficiency wage theory?

Michael decides to hire some additional workers for his roofing company.The equilibrium wage is $17 per hour.Efficiency wage theory suggests that it is reasonable for Michael to offer

Which of the following causes of unemployment is not associated with a wage rate above the market equilibrium level?

Efficiency wages

Suppose that efficiency wages become more common in the economy.Imposing efficiency wages

Wages set above the equilibrium wage by

According to the theory of efficiency wages,if a firm stops paying efficiency wages it is likely to see a(n)

The theory of efficiency wages explains why

Emeril is the owner of a restaurant.He decides to raise the wages of his workers even though he faces an excess supply of labor.His decision

Efficiency wages

Susan is a plant manager in charge of a factory in a relatively poor country.Even though market wages are low,she decides to raise the wages of her workers.Her decision

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion