Question :
11) The relative-wage explanation for the existence of downwardly sticky : 1381202
11) The relative-wage explanation for the existence of downwardly sticky wages emphasizes
A) unspoken agreements between workers and firms that firms will not cut wages.
B) the incentive that firms may have to hold wages above the market clearing rate.
C) employment contracts that stipulate workers’ wages, usually for a period of one to three years.
D) the contention that workers in one industry may be unwilling to accept a wage cut, unless they know that workers in other firms and industries are receiving similar cuts.
12) According to the relative-wage explanation of unemployment, workers will be willing to accept wage cuts only if
A) they know that unemployment is increasing in other industries.
B) they can be convinced that they are overpaid relative to workers doing similar jobs at other firms.
C) they know that workers in other firms and industries are receiving similar cuts.
D) the economy is in a prolonged recession.
13) Workers in the textile industry are laid off during a recession because they are unwilling to accept a wage cut, unless they know that workers in other industries are receiving similar cuts. This example is consistent with the
A) relative-wage explanation of unemployment.
B) explicit contract explanation of unemployment.
C) social contract explanation of unemployment.
D) efficiency wage explanation of unemployment.
14) The percentage of workers whose wages are set by explicit contracts falls. This should
A) make it more difficult for the labor market to reach an equilibrium after a change in the demand for labor.
B) make it easier for the labor market to reach an equilibrium after a change in the demand for labor.
C) have no impact on the movement of the labor market toward equilibrium after a change in the demand for labor.
D) cause the labor market to always be at an equilibrium, even if there is a change in the demand for labor.
15) Even though explicit contracts may lead to layoffs during recessions, explicit contracts may still be efficient because such contracts
A) guarantee that only the least-productive workers will be laid off.
B) reduce unemployment effects.
C) reduce negotiation costs.
D) will equitably spread the layoffs among junior and senior workers.
16) Suppose that air traffic controllers, whose wages have been locked into place by a two-year contract, are laid off during a recession. This example is consistent with the
A) social contract explanation of unemployment.
B) explicit contract explanation of unemployment.
C) efficiency wage explanation of unemployment.
D) relative-wage explanation of unemployment.
17) Which of the following arguments is NOT offered to explain the existence of “sticky” wages?
A) the social contract explanation
B) the relative-wage explanation
C) the fact that labor contracts don’t exist
D) the explicit contract explanation
18) When a firm pays higher wages for its workers to improve workers’ productivity, the firm pays
A) sticky wages.
B) flexible wages.
C) efficiency wages.
D) minimum wages.
19) Which of the following is NOT a reason why firms pay efficiency wages?
A) to reduce turnovers
B) to abide by minimum wage laws
C) to improve morale
D) to reduce shirking of work
Refer to the information provided in Figure 14.3 below to answer the questions that follow.
Figure 14.3
20) Refer to Figure 14.3. Assume that the productivity of workers increases as the wage rate increases. The efficiency wage
A) would be below $10.
B) would equal $10.
C) would be above $10.
D) could either be above or below $10.
