The theory of efficiency wages challenges the assumption that
A)workers are efficient.
B)workers have an incentive to shirk their responsibilities to their employers.
C)wages must always adjust to balance labor supply and labor demand.
D)firms sometimes choose to pay their workers above-equilibrium wages.

Question

Quizplus · Accepted Answer

Efficiency wage theory suggests that firms may pay wages above the equilibrium level to increase productivity, reduce turnover, and discourage shirking, thus challenging the assumption that wages must always adjust to balance labor supply and demand.

The Theory of Efficiency Wages Challenges the Assumption That