Internal labor markets have higher wages and benefits. Reason(s) firms may voluntarily form internal labor markets is to: a. lower the cost of production. Due to their size, large firms have control problems (effectively converting labor power into output). Forming internal labor markets (or bureaucratic control) solves this problem. b. lower their taxes. Large corporations that form internal labor markets and pay health benefits receive a tax write-off that more than make up for the higher wages and benefits. c. lower the cost of production. For firms that have significant skills that can only be learned on the job, forming internal labor markets will lower their turnover rate. Thus, even with higher wages and benefits the cost of production falls because of higher skill level of their employees.
Internal labor markets have higher wages and benefits. Reason(s) firms may voluntarily form internal labor markets is to: a. lower the cost of production. Due to their size, large firms have control problems (effectively converting labor power into output). Forming internal labor markets (or bureaucratic control) solves this problem. b. lower their taxes. Large corporations that form internal labor markets and pay health benefits receive a tax write-off that more than make up for the higher wages and benefits. c. lower the cost of production. For firms that have significant skills that can only be learned on the job, forming internal labor markets will lower their turnover rate. Thus, even with higher wages and benefits the cost of production falls because of higher skill level of their employees.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- Internal labor markets have higher wages and benefits. Reason(s) firms may voluntarily form internal labor markets is to:
a. lower the cost of production. Due to their size, large firms have control problems (effectively converting labor power into output). Forming internal labor markets (or bureaucratic control) solves this problem.
b. lower their taxes. Large corporations that form internal labor markets and pay health benefits receive a tax write-off that more than make up for the higher wages and benefits.
c. lower the cost of production. For firms that have significant skills that can only be learned on the job, forming internal labor markets will lower their turnover rate. Thus, even with higher wages and benefits the cost of production falls because of higher skill level of their employees.
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