The theory of efficiency wages suggests that firms may pay above-equilibrium wages
A)to reduce employee turnover.
B)to prevent unions from recruiting members.
C)to reduce the need for minimum wage laws.
D)to increase the demand for better-skilled workers.

Question

Quizplus · Accepted Answer

Efficiency wages suggest that paying workers higher than the going wage rate can be beneficial for firms. This is because higher wages can reduce employee turnover and increase worker productivity, which may ultimately save the firm money in the long run.

The Theory of Efficiency Wages Suggests That Firms May Pay