Which of the following help explain why firms pay bonuses to workers during particularly profitable years to prevent workers from becoming disgruntled ?
Correct answer: D. People care about fairness
- A. people are rational maximizers
- B. People are reluctant to change their minds
- C. People are inconsistent over time
- D. People care about fairness
Explanation
Workers may view bonuses as fair recognition of their contribution during profitable years, and withholding them can create resentment even when wages are unchanged. This reflects the behavioural-economic idea that people care about fairness, not only their absolute income.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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