Why increased wages in a company can contribute to workers

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a) Discuss why increased wages in a company can contribute to workers' efforts increasing, while turnover in the company is reduced.

b) Derive conditions for optimal pay in the company when you assume that the company takes into account that:

i) increased pay results in increased effort and ii) increased pay results in reduced throughput. Interpret the terms.

c) How will an exogenous increase in unemployment affect the company's wages in the two cases discussed under b)?

d) Finally, discuss how the models derived under b) can explain the existence of positive equilibrium unemployment.

Reference no: EM132893560

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