Cleveland is employed at a coffee house and is the best latte maker there. The e

Question

Cleveland is employed at a coffee house and is the best latte maker there. The economy is in a recession and fancy coffee sales are declining. The owner of the coffee house is _________ to reduce his hourly wages because___________. A) unlikely; output and input prices usually fall during a recession B) unlikely; taking a pay cut will always reduce productivity and overall morale C) likely; employees prefer taking pay cutsso that others won’t get laid off Cleveland is employed at a coffee house and is the best latte maker there. The economy is in a recession and fancy coffee sales are declining. The owner of the coffee house is _________ to reduce his hourly wages because___________. A) unlikely; output and input prices usually fall during a recession B) unlikely; taking a pay cut will always reduce productivity and overall morale C) likely; employees prefer taking pay cutsso that others won’t get laid off A) unlikely; output and input prices usually fall during a recession B) unlikely; taking a pay cut will always reduce productivity and overall morale C) likely; employees prefer taking pay cutsso that others won’t get laid off

Explanation / Answer

B) unlikely; taking a pay cut will always reduce productivity and overall morale

Reason

Employers generally layoff workers instead of a pay cut. Pay cut reduces morale and the employers will get disincentive to work, rather layoff makes employees do more work in the fear of losing a job.

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