Internal labor markets may contribute to dynamic efficiency by:
A)paying younger workers more than their marginal revenue products
B)paying older workers more than their marginal revenue products
C)paying older workers less than their marginal revenue products
D)paying each worker a wage equal to her marginal revenue product

Question

Quizplus · Accepted Answer

Internal labor markets may contribute to dynamic efficiency by paying older workers more than their marginal revenue products to retain their knowledge, skills, and experience within the organization. This retention of human capital can lead to improved productivity, innovation, and ultimately, dynamic efficiency. Paying younger workers more than their marginal revenue products may not be sustainable and may lead to inefficiencies in the long run. Paying each worker a wage equal to her marginal revenue product may not incentivize workers to stay with the organization and invest in their human capital, leading to a loss of valuable knowledge and skills over time. Paying older workers less than their marginal revenue products may lead to talent drain and reduced innovation.

Internal Labor Markets May Contribute to Dynamic Efficiency By