Which of the following is true of the efficiency wage model?
A)According to the efficiency wage model, wages should increase as the productivity of workers increases with experience.
B)According to the efficiency wage model, market wages should always be lower than the efficiency wage.
C)In the efficiency wage model, employers pay their employees a wage equal to the equilibrium wage as a means to increase efficiency.
D)In the efficiency wage model, employers pay their employees a wage less than the equilibrium wage to cut costs.
E)In the efficiency wage model, employers pay their employees a wage more than the equilibrium wage as a means to increase their productivities.

Question

Quizplus · Accepted Answer

According to the efficiency wage model, employers pay their employees a wage more than the equilibrium wage as a means to increase their productivities. This is because by paying higher wages, employees are motivated to work harder and stay in the job, leading to increased productivity and efficiency. Therefore, option E is the correct choice. Option A is incorrect as the increase in productivity is the reason for paying higher wages, not the result. Option B is incorrect as the efficiency wage is typically higher than the market wage. Option C is incorrect as the efficiency wage is typically higher than the equilibrium wage. Option D is incorrect as the objective of the efficiency wage model is to increase efficiency, not cut costs.

Which of the Following Is True of the Efficiency Wage