Question

Suppose a manager were to refuse to provide a fringe benefit that could lower the wages of their workers, but which on balance benefited workers. Why has this manager prevented the firm’s average cost curves from being as low as possible?

Answer 1

Benefits such as car facility, insurance facilities etc are in addition to salary or wage to workers, these benefits are called fringe benefits.

If firms offer such fringe benefits, wages are reduced, then total cost of production falls as well. Thus, offers of fringe benefits lead to fall in total cost of production. Manager might not follow the fringe benefits when cost of fringe benefits is greater than benefits to workers. in such situation, both firms and workers are worse off. it makes firm less competitive. Thus, manager might refuge to pay fringe benefits.