What factors can push the real wage rate above its equilibrium level? Briefly explain each factor
What will be an ideal response?
The three factors that can push the real wage rate above the equilibrium wage rate are efficiency wages, the minimum wage, and union wages. An efficiency wage is a wage rate that is set by a firm above the equilibrium wage rate. The idea is that the firm's workers will work hard in order to keep their jobs because they know that if they are fired the (equilibrium) wage they are likely to get at a new job will be less than the efficiency wage. The minimum wage is a government regulation that sets the lowest legal wage. If the minimum wage is set above the equilibrium wage rate, the equilibrium wage rate becomes illegal. Finally, a union wage is a wage rate that results from bargaining between a firm and a labor union. Typically the labor union can negotiate a wage rate that exceeds the equilibrium level in a competitive market.
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In cost-benefit analysis, intangibles include such factors as:
a. quality of life considerations b. changes in land values resulting from a project c. aesthetic contributions d. a and b only e. a and c only
Which of the following is a strength of a command-based economic system?
a. It is possible for goods to be allocated based on need rather than based on willingness and ability to pay. b. Since price is freely set based on supply and demand, there are few shortages or surpluses. c. Consumers can transmit their preference for product quality and variety by way of their "dollar votes" cast in the marketplace. d. Producers have strong incentives to innovate because successful innovators are rewarded with higher profit.