Which of the following is an example of an efficiency wage?
A)a higher wage paid to a more experienced worker
B)a below-equilibrium wage paid by a small business exempt from minimum-wage laws
C)an above-equilibrium wage paid by a firm to reduce turnover costs
D)a wage tied to participation in a government-sponsored job training program

Question

Quizplus · Accepted Answer

An efficiency wage is a higher-than-equilibrium wage that a firm pays to motivate workers to be more productive, reduce turnover costs, and attract and retain the most qualified employees. Choice C matches this definition, as the firm pays an above-equilibrium wage to reduce its turnover costs. Choices A, B, and D do not represent efficiency wages. Choice A represents a wage paid based on experience, not productivity or efficiency. Choice B represents a below-equilibrium wage, which means the firm cannot attract high-quality employees or motivate workers to be productive. Choice D represents a wage tied to job training, but it does not necessarily motivate workers to be more productive or reduce turnover costs.

Which of the Following Is an Example of an Efficiency