Efficiency wages
A)increase productivity and reduce unemployment.
B)increase productivity but increase unemployment.
C)decrease productivity but reduce unemployment.
D)decrease productivity and increase unemployment.

Question

Quizplus · Accepted Answer

Efficiency wages are higher than the market-clearing wage and are paid to increase worker productivity. However, because they are above the market rate, they can lead to higher unemployment as firms cannot afford to hire as many workers.

Efficiency Wages