If new working practices raise a firm’s productivity, will the firm respond by paying its workers more? Not in a competitive market. In such a market the firm, to gain a competitive edge, will reduce prices. The workers’ real wages, as measured by those wages’ purchasing power, will still rise because of lower prices.
In a competitive market which of the following, if true, ensures that the workers of a firm that achieved productivity gains will derive from these gains the benefit of higher real wages?
(A) The workers’ firm continues to achieve productivity gains.
(B) Other firms do not achieve comparable productivity gains.
(C) The workers buy products made by the firm that employs them.
(D) The workers prefer the new working practices over the old.
(E) The firm pays its workers at or above the industry’s average.
Q/A-C why not A
In a competitive market which of the following, if true, ensures that the workers of a firm that achieved productivity gains will derive from these gains the benefit of higher real wages?
(A) The workers’ firm continues to achieve productivity gains.
(B) Other firms do not achieve comparable productivity gains.
(C) The workers buy products made by the firm that employs them.
(D) The workers prefer the new working practices over the old.
(E) The firm pays its workers at or above the industry’s average.
Q/A-C why not A
