A firm might offer efficiency wages to reduce worker turnover and thereby reduce production costs.

Name: A firm might offer efficiency wages to reduce worker turnover and thereby reduce production costs.
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Question

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Efficiency wages are higher than the market-clearing wage and are offered by firms to increase worker productivity, reduce turnover, and attract better applicants, which can lead to lower overall production costs despite the higher wages.

A Firm Might Offer Efficiency Wages to Reduce Worker Turnover