Question

Which of the following statements are correct?

A. Employment rent benefits workers but harms the firms as it implies higher production costs.
B. Piece rate payment is an appropriate way to pay employees working on a team project.
C. Positive employment rent implies that there must always be involuntary unemployment.
D. Firms pay workers more than their reservation options so that workers do not want to leave.

Answer 1

Analysis of the statements shows that employment rent can indeed benefit workers and, through efficiency wage theory, potentially the firm as well. Piece rate payment is not typically suited for team projects where cooperation is key.The correct option is A.

Step-by-step explanation:

The question at hand involves assessing the correctness of various statements related to employment, wages, and productivity within the realm of economics. A closer analysis is required to address each one. Here are the evaluations:

• Employment rent benefits workers by providing them with a higher wage than their reservation wage. While it might imply higher production costs for firms, it is not universally 'harmful' as it can lead to more motivated and productive workers, which can offset the higher costs.
• Piece rate payment might not be the best approach for team projects since it rewards individual output rather than team effort, potentially leading to a lack of cooperation or shared responsibility among team members.
• Positive employment rent does suggest that workers value their current job over their next best alternative (unemployment or a poorer paid job), but it doesn't necessarily mean that there must always be involuntary unemployment—though it could be one possible outcome.
• Firms might pay workers more than their reservation wages for several strategic reasons, such as reducing turnover or encouraging higher productivity, as suggested by efficiency wage theory.