Which of the following statements about efficiency wage theory is true ?
Correct answer: D. Paying above the competitive equilibrium wage may improve worker health lower worker turnover improve worker quality and increase worker effort
- A. Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities
- B. Firms do not have a choice about whether they pay efficiency wages or not because these wages are determined by law
- C. Paying the lowest possible wage is always the most efficient (Profitable)
- D. Paying above the competitive equilibrium wage may improve worker health lower worker turnover improve worker quality and increase worker effort
Explanation
Efficiency-wage theory explains above-equilibrium pay through benefits such as better worker health, lower turnover, improved applicant quality, and stronger effort. The wage is profitable when these gains outweigh the extra wage cost.
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