Which of the following is an example of a reason why firms might pay efficiency wages ?
Correct answer: E. All of these answers
- A. At equilibrium wages workers sleep when the boss is not looking because workers are not deeply concerned about being fired
- B. At equilibrium wages workers often quit to find better jobs.
- C. At equilibrium wages only minimally qualified workers apply for the job
- D. At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy
- E. All of these answers
Explanation
Efficiency wages can reduce shirking, employee turnover and adverse selection, while higher pay may also help workers afford better nutrition and remain productive. Thus, each listed situation gives a reason a firm might pay above-equilibrium wages.
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