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 level of unemployment?
A)Increases,but some unemployment remains
B)Increases,and the labor market reaches full employment
C)Decreases
D)Does not change

Question

Quizplus · Accepted Answer

The ability to monitor worker effort levels more easily may reduce shirking to some extent, but it cannot completely eliminate it. As a result, firms may still choose to pay efficiency wages to motivate workers to work hard, which leads to a higher equilibrium wage rate and some level of unemployment. Therefore, the level of unemployment increases, but some unemployment remains.

Suppose New Electronic Devices Make It Easier to Monitor the Effort