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Demand Side of Labor Market: Compensating Differentials and Efficiency Wages
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Demand Side of Labor Market: Compensating Differentials and Efficiency Wages

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Questions and Answers

What happens if an employer pays above the maximum pay level?

  • The employer earns more profit
  • The government pays the difference
  • The employer must pass on the higher pay level to customers through price increases (correct)
  • The employees work for less hours

    • What is an alternative to passing on the higher pay level to customers through price increases?

  • Decreasing the quality of products
  • Firing employees
  • Maintaining prices and allocating a greater share of total revenues to cover labor costs (correct)
  • Increasing the number of employees

    • Why might an employer choose to pass on the higher pay level to customers through price increases?

  • To reduce employee salaries
  • To maintain the same profit margin (correct)
  • To increase the quality of products
  • To increase employee working hours

    • What is the consequence of holding prices fixed when an employer pays above the maximum?

    <p>The employer allocates a greater share of total revenues to cover labor costs</p> Signup and view all the answers

    What is the primary concern for an employer who pays above the maximum pay level?

    <p>Maintaining profit margins</p> Signup and view all the answers

    What is regulated in addition to pay-level?

    <p>Pension and health care plans</p> Signup and view all the answers

    What aspect of employee compensation is regulated?

    <p>Pay-level and pay forms</p> Signup and view all the answers

    What is an example of a regulated pay form?

    <p>Pension plan</p> Signup and view all the answers

    What is not mentioned as a regulated aspect of employee compensation?

    <p>Job descriptions</p> Signup and view all the answers

    How many aspects of employee compensation are regulated?

    <p>Multiple</p> Signup and view all the answers

    What motivates employees to choose a particular organization?

    <p>Higher pay</p> Signup and view all the answers

    What is the outcome of higher pay satisfaction in an organization?

    <p>Higher performance and quality in work</p> Signup and view all the answers

    What is the relevant market in an organization?

    <p>The market where the competition takes place</p> Signup and view all the answers

    Why do employees prefer organizations with higher pay?

    <p>Because they offer higher pay satisfaction</p> Signup and view all the answers

    What is the relationship between organization strategy and employee performance?

    <p>The organization strategy affects employee performance</p> Signup and view all the answers

    What is a characteristic of markets with low competition?

    <p>Higher profit margins</p> Signup and view all the answers

    What do businesses in markets with low competition typically experience?

    <p>Increased financial flexibility</p> Signup and view all the answers

    What is a consequence of low competition in a market?

    <p>Higher profit margins</p> Signup and view all the answers

    What is a benefit of operating in a market with low competition?

    <p>Greater financial flexibility</p> Signup and view all the answers

    What is a characteristic of businesses in markets with low competition?

    <p>Higher profit margins</p> Signup and view all the answers

    What is the purpose of compensating differentials?

    <p>To attract workers to a high-risk job by offering higher pay</p> Signup and view all the answers

    What is the goal of efficiency wages?

    <p>To lower the turnover rate of a job</p> Signup and view all the answers

    What is signaling in the context of job offers?

    <p>Offering a low base pay with promises of bonuses and benefits</p> Signup and view all the answers

    Which of the following is an example of compensating differentials?

    <p>A company offering a higher pay for a high-risk job</p> Signup and view all the answers

    What is the primary difference between efficiency wages and compensating differentials?

    <p>The purpose of the wage increase</p> Signup and view all the answers

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