Chapter 6 - The Firms, Owners, Managers And Employees

Question 1

Wage Curve

Answer 1

The Curve showing the real wage in the economy as a whole that has to be paid at a given level of employment or employment rate to secure adequate worker effort.

Question 2

Worker’s Best Response Function (To Wage)

Answer 2

The amount that a worker will perform for each wage that the employer may offer.

Question 3

Firm-Specific Assets

Answer 3

Something that a person owns or can do that is more value in the individuals current firm than in their next best alternative.

Question 4

Incomplete Contract

Answer 4

A contract that does not specify, in an enforceable way, every aspect of the exchange that affects the interests the interests of parties to the exchange (of others).

Question 5

Employment Rent (Or Cost Of Job Loss)

Answer 5

The economic rent a worker receives when the value to her of a job exceeds the value of her next best alternative (that is unemployment).

Question 6

Division Of Labour (Or Specialisation)

Answer 6

The specialisation of producers to carry out different tasks in the production process.

Question 7

Reservation Wage

Answer 7

What an employee would get either in alternative employment, or from an unemployment benefit or other support, were he or she not employed in the employee’s current job.

Question 8

Trade Union

Answer 8

An organisation consisting predominantly of employees, the principal activators of which include the negotiation of rayed or pay and conditions of employment for its members.