How does the theory of efficiency wages explain above-equilibrium wages?
A)Employers are forced by competition to pay higher wages in efficient markets.
B)Employers give their workers a higher wage in the hope that it will lead to increased productivity.
C)Workers get higher wages when they prove they are increasing their productivity.
D)Workers demand higher wages to compensate for poor fringe benefits.

Question

Quizplus · Accepted Answer

The theory of efficiency wages explains above-equilibrium wages as a result of employers giving their workers a higher wage in the hope of increasing their productivity. When workers are paid above-equilibrium wages, they are motivated to work harder and be more productive, which can benefit the company in the long run. This can also lead to lower turnover rates and increased job satisfaction among employees.

How Does the Theory of Efficiency Wages Explain Above-Equilibrium Wages