Suppose new electronic devices make it easier to monitor the effort levels of workers.If some shirking is still possible in the efficiency wage model,what happens to the efficiency wage?
A)Declines,but remains above the competitive wage
B)Declines,and falls below the competitive wage
C)Increases
D)Does not change

Question

Quizplus · Accepted Answer

With the ability to monitor worker effort levels more easily, shirking becomes more difficult, meaning employers do not need to offer as high of an efficiency wage to incentivize their employees to work hard. However, the efficiency wage will still remain above the competitive wage to ensure that workers are being paid enough to feel valued and motivated to work hard.

Suppose New Electronic Devices Make It Easier to Monitor the Effort