Which theory explains the fact that some firms may choose to pay their employees more then they would earn as determined by equilibrium in the labor market?
A)the theory of efficiency wages
B)the marginal-productivity theory
C)human-capital theory
D)signaling theory

Question

Quizplus · Accepted Answer

The theory of efficiency wages explains that firms may choose to pay their employees more than the equilibrium wage rate in order to increase worker productivity and reduce turnover. By paying higher wages, firms motivate employees to work harder and be more committed to their jobs, which can result in higher profits for the firm in the long run.

Which Theory Explains the Fact That Some Firms May Choose