Figure 19-1
-Refer to Figure 19-1. Suppose the local labor market was in equilibrium to begin with but then the largest local employer decided to change its compensation scheme to $8 as shown. Which of the following compensation schemes could the graph be illustrating?
A)An efficiency wage.
B)Discrimination.
C)A compensating differential.
D)The superstar phenomenon.

Question

Figure 19-1 
-Refer to Figure 19-1. Suppose the local labor market was in equilibrium to begin with but then the largest local employer decided to change its compensation scheme to $8 as shown. Which of the following compensation schemes could the graph be illustrating?
A)An efficiency wage. 
B)Discrimination. 
C)A compensating differential. 
D)The superstar phenomenon.

Quizplus · Accepted Answer

An efficiency wage is a higher-than-market wage offered by firms to incentivize workers to put in more effort and reduce turnover. The increase in wages by the largest local employer in this case could be an example of an efficiency wage.

Figure 19-1 -Refer to Figure 19-1. Suppose the Local Labor Market Was